MOHANA KRISHNA AGENCIES, SRIKAKULAM V. THE INCOME TAX OFFICER, WARD-1, SRIKAKULAM

ITA 83/VIZ/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1877 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 20-05-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 03-03-2024
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: APARNA VILLURI
• Keywords: Business income
• Section: 131; 144; 142(1); 133(6)

Judgement Text

आयकर अपीलीयअधिकरण, विशाखापटणम पीठ, विशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री द ु व्ि ू रु आर एल रेड्डी, न्याययक सदस्य एिं श्री एस बालाक ृ ष्णन, लेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ I.T.A. No.83/Viz/2024 (निर्धारण वर्ा / Assessment Year : 2017-18) Mohana Krishna Agencies, Srikakulam. PAN: AAVFM 0565B Vs. The Income Tax Officer, Ward-1, Srikakulam. (अपीलधर्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलधर्थी की ओर से/ Appellant by : Smt. A. Aruna, AR प्रत्यधर्थी की ओर से / Respondent by : Dr. Aparna Villuri, Sr. AR स ु िवधई की तधरीख / Date of Hearing : 21/05/2024 घोर्णध की तधरीख/Date of Pronouncement : 31/05/2024 O R D E R PER DUVVURU RL REDDY, Judicial Member : This appeal filed by the assessee is against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“Ld. CIT(A)-NFAC”] in DIN & Order No. ITBA/NFAC/S/250/2023-24/1059541252(1), dated 10/01/2024 arising out of the order passed U/s. 144 of the Income Tax Act, 1961 [“the Act”] for the AY 2017-18. 2 2. Briefly stated the facts of the case are that the assessee Mohana Krishna Agencies is a Firm engaged in the business of distribution of Hindustan Leaver Company etc. During the assessment proceedings, it was observed by the Ld. AO that as per the information in ITD software, the assessee has made substantial cash deposits during the demonetization period ie., from 9/11/2016 to 31/12/2016 in the assessee’s bank account with Corporation Bank, Narasannapeta Branch. Thereafter, the assessee’s case was selected for scrutiny to verify the cash deposits during the demonetization period. The Ld. AO also observed that the assessee has not filed its return of income for the AY 2017-18 neither U/s. 139 of the Act nor in response to notice issued U/s. 142(1) of the Act. Therefore, the Ld. AO issued another notice U/s. 142(1) of the Act on 27/11/2017 and the same was duly served on the assessee on 30/11/2017 but the assessee has not complied with the notice. The Ld. AO obtained the assessee’s bank account statement from the Corporation Bank, Narasannapeta U/s. 133(6) of the Act. Subsequently, the Ld. AO issued summon U/s. 131 of the Act, dated 4/9/2019 and in response, during the course of sworn statement, the assessee submitted that the assessee-firm has closed its business and stated that the evidence for cash deposits would be submitted before the Ld. AO by 13/09/2019. However, the assessee failed to do so, and did not produce the books of account and bills and vouchers etc. In the absence of any verifiable evidence / 3 documents substantiating the cash deposits in the assessee’s bank account during the FY 2016-17, the Ld. AO completed the assessment U/s. 144 of the Act based on the material available on record. Accordingly, the Ld. AO taking into account the credits in the assessee’s bank account during the year 2016-17 of Rs. 6,87,17,587/- and estimated the income of the assessee and computed the taxable income @ 8% of Rs. 6,87,17/,587/- which works out to Rs. 54,97,407/- and made the addition by treating the amount of Rs. 54,97,407/- as misreporting of income and initiated the penalty proceedings U/s. 270A of the Act. Thus, the Ld. AO passed the assessment order U/s. 144 of the Act on 26/12/2019. Aggrieved by the order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A)-NFAC. 3. On appeal, the Ld. CIT(A)-NFAC, even though the assessee has been given multiple opportunities to substantiate its case, considering no response from the assessee’s side, after discussing the issues at length based on the material available on record , partly allowed the appeal of the assessee. While granting relief, the Ld. CIT(A)-NFAC observed that since the assessee itself disclosed Gross Profit @ 4.6% and 4.7% in AY 2015-16 and 2016-17 respectively, in the absence of any documentary evidence to justify its actual profits for the AY under consideration, it would be deemed fit to estimate the Gross Profit at the rate of 6% which works out to Rs. 4 41,23,055/-. Aggrieved by the order of the Ld. CIT(A)-NFAC, the assessee is in appeal before the Tribunal by raising the following grounds of appeal: “1. The order of the Ld. CIT(A) is contrary to the facts and also the law applicable to the facts of the case. 2. The Ld. CIT(A) is not justified in upholding the action of the AO in treating the entire deposits of Rs. 6,87,17,587/- in the bank account as turnover of the appellant as against actual turnover of Rs. 6,23,90,543/-. 3. The Ld. CIT(A) is not justified in directing the Ld. AO to estimate the gross profit @ 6% of the turnover which is on higher side. 4. Any other ground may be urged at the time of hearing.” 4. At the outset, it is the submission of the Ld. Authorized Representative [AR] that while estimating the income of the assessee, the Ld. Revenue Authorities ignored the fact that all the credits in the bank account of the assessee are not the turnover of the assesse-firm. He further submitted that as per the VAT returns of the assessee, the total sale without VAT during the F.Y:2016-17 was at Rs.6,23,90,543/. Whereas the Ld. Revenue Authorities took the entire credits in the bank as sales. Thus, there is a variation of Rs.63,27,044/- (Rs.6,87,17,587- Rs.6,23,90,543/-). He further submitted that before the Ld. CIT(A)-NFAC the assessee submitted the copy of VAT return for the FY 2016-17 in support of the claim of total sales of Rs. 6,23,90,543/- during the FY 2016-17. However, the Ld. CIT(A)-NFAC also erred in appreciating the submissions made by the assessee and granted a meagre relief to the assessee by directing the 5 Ld.AO to restrict the gross profit @ 6% of the turnover against @8% made by the Ld. AO. The Ld. AR also further submitted that the companies would give GP margin @ 3.5% to 4.25% only and that will not exceed 4.25% of gross profit. Whereas the Ld. AO estimated @8% of the gross sales and the Ld. CIT(A)-NFAC estimated it @ 6%. The Ld. AR further submitted that even the Ld. Revenue Authorities have not given any comparable cases while adopting 8% and 6% gross profit by the Ld. AO and Ld. CIT(A)-NFAC respectively, which is arbitrary decision in its nature. Therefore, the Ld. AR pleaded that since the estimation of gross profit @ 6% as directed by the Ld. CIT(A)-NFAC is on higher side, the assessee may be granted substantial relief. 5. On the other hand, the Ld. Departmental Representative [DR] fully supported the orders of the Ld. Revenue Authorities and argued in support of the same. 6. We have heard both the sides and perused the material available on record as well as the orders of the Ld. Revenue Authorities. For the AY under consideration, the assessee has not filed its return of income. During the assessment proceedings for the AY 2017-18, the Ld. AO observed that the assessee has made substantial cash deposits in its Corporation Bank, Narasannapeta Branch. From the assessment order, it is apparent that the assessee has not responded to any of the notices 6 issued / turned out until the summon U/s. 131 was issued by the Ld. AO. While giving reply to the summon, the assessee made a sworn statement before the Ld. AO and stated that it would produce all verifiable evidence for cash deposits by 13/9/2013 but did not happen. Furthermore, the assessee has not even produced any books of accounts and bills & vouchers etc., before the Ld. AO. Under these circumstances, in the absence of any verifiable evidence / documents to substantiate the cash deposits, the Ld. AO has no other option except to pass the order based on the material available on record and passed the assessment order U/s. 144 by estimating the income of the assessee @ 8% of total cash credits during the AY under consideration. On appeal, before the Ld. CIT(A)-NFAC, the assessee has not properly utilized the opportunities provided to them. The assessee contended before the Ld. CIT(A)-NFAC vide its submissions that the entire credits appearing in the bank are not the turnover of the assessee-firm whereas the Ld. AO considered the entire credits as sales and therefore there is a variation of Rs. 63,27,044/-. However, the assessee has not produced any substantial documentary evidence to explain the variation of Rs. 63,27,044/- before the Ld. CIT(A)-NFAC. Further, the assessee has not even given an explanation or documentary evidence to justify its claim that the Gross Profit margin should be between 3.5% to 4.25% either before the Ld. CIT(A)-NFAC or before the Tribunal. We find that the Ld. CIT(A)-NFAC, vide para 6.2.2 of his order, has 7 judiciously examined the income of the assessee vis-à-vis the sales made during the AY 2013-14 to 2016-17 and noted that the assessee has shown very lower GP rate during these years. However, the assessee has not furnished any documentary evidence to establish its lower GP rate in the earlier AYs as well as in the AY under consideration. Considering all the facts and circumstances as well as the material available before him, the Ld. CIT(A)-NFAC has directed the Ld. AO to estimate the gross profit @ 6% against @ 8% made by the Ld. AO by observing (at Page 9 of the CIT(A)- NFAC’s order) as under: “The appellant has itself disclosed gross profit @ 4.6% and 4.7% in AY 2015-16 and AY 2016-17. However, it may be noted that these income tax returns were not subject to scrutiny and therefore, its authenticity has not been established. Since the appellant has not been able to justify with documentary evidence its actual profits, it would be deemed fit to estimate the gross profit at the rate of 6%. The gross profit works out to Rs. 41,23,055/- (6% of Rs. 6,87,08,443/-). The appellant gets relief of Rs. 13,74,352/-.” 7. Considering the above facts and circumstances of the case as well as the material available before us, we are of the considered view that when the assessee claims that all the credits are not the turnover of the assessee-firm, the onus is on the assessee to prove its claim with cogent documentary evidence, which the assessee failed to do so even before us. Further, in the absence of any documentary evidence to prove the variation of Rs. 63,27,044/-, as contended by the assessee, and also in the absence of any books of account and bills & vouchers etc., for verification to 8 substantiate the cash deposits, taking into account the earlier years disclosure of gross profit by the assessee, the Ld. AO estimated the income of the assessee @8% and on appeal the Ld. CIT(A)-NFAC has granted considerable relief to the assessee by directing the Ld. AO to estimate the GP @ 6%. Therefore, we have no hesitation to come to a conclusion that there is no infirmity in the order of the Ld. CIT(A)-NFAC and it does not call for any interference. Accordingly, the grounds raised by the assessee are dismissed. 8. In the result, appeal of the assessee is dismissed. Pronounced in the open Court on 31 st May, 2024. Sd/- Sd/- (एस बालाक ृ ष्णन) (द ु व्ि ू रु आर.एल रेड्डी) (S.BALAKRISHNAN) (DUVVURU RL REDDY) लेखा सदस्य/ACCOUNTANT MEMBER न्याययकसदस्य/JUDICIAL MEMBER Dated :31/05/2024 OKK - SPS आदेश की प्रतिलिपि अग्रेपिि/Copy of the order forwarded to:- 1. निर्धाररती/ The Assessee– Mohana Krishna Agencies, 23, Maruthi Nagar, Narasannapeta, Srikakulam, Andhra Pradesh – 532421. 2. रधजस्व/The Revenue – The Income Tax Officer, Ward-1, Income Tax Office, Palakonda Road, Srikakulam, Andhra Pradesh – 532103. 3. The Principal Commissioner of Income Tax, 4.आयकर आय ु क्त (अपील)/ The Commissioner of Income Tax (Appeals), 9 5. ववभधगीय प्रनतनिधर्, आयकर अपीलीय अधर्करण, ववशधखधपटणम/ DR, ITAT, Visakhapatnam 6.गधर्ा फ़धईल / Guard file आदेशधि ु सधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam