Dr Shehalata Kanungo, Kendrapada V. ITO, Paradeep

ITA 92/CTK/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0768 (ITAT-CUTTACK)
• Duration Of Justice: 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 21-02-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 19-03-2010
• Court: TRIBUNAL
• Department Lawyers: J KHANRADR
• Assessee Lawyers: R N SAMAL
• Keywords: Business income
• Section: 80C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO , JUDICIAL MEMBER / I.T.A.NO. 92/CTK/2010 / ASSESSMENT YEAR 2004 - 05 DR. SNEHALATA KANUNGO, PROP. M/S.KANUNGO & PARTNERS, AT: MAHIPAL, DIST. KENDRAPARA PAN AEPPK 8253 G - - - VERSUS - INCOME - TAX OFFICER, WARD 2, PARADEEP. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI R.N.SAMAL, AR / FOR THE RESPONDENT: / SHRI J.KHANRA,DR / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THIS APPEAL BY THE ASSESSEE AGITATES THE ACTION OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IN CONFIRMING THE COMPUTATION OF INCOME ON THE BASIS OF ASSESSMENT U/S.143(3) R.W.S. 264 OF THE INCOME - TAX ACT,1961. 2. THE ASSESSEE H AS AGITATED THAT THE ESTIMATION OF NET INCOME @1% OF THE TOTAL TURNOVER BEING A DEALER IN PETROL AND DIESEL IS ARBITRARY AND HIGH PITCHED AS THE ASSESSEE IS ONLY A DISTRIBUTOR DEALER IN PETROLEUM PRODUCTS WHEN THE COMMISSION EARNED THERE FROM IS FROM GOVER NMENT AGENCIES AT RATE FIXED BY THEM . THE ASSESSEE HAS ALSO AGITATED THE DENIAL OF REBATE U/S.88C AND 80C. 3. THE BRIEF FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM SALE OF PETROL PRODUCTS , FILED HER RETURN DECLARING INCOME OF 1,61,1 00 FOR THE AY 2004 - 05 WHEN THE ASSESSING OFFICER TOOK NOTE OF THE ASSESSEE I.T.A.NO. 92/CTK/2010 2 HAVING MOVED A REVISION PETITION U/S.264 WAS TO BE RECONSIDERED FOR THE INTRODUCTION OF CAPITAL BY THE PARTNERS. THE ASSESSING OFFICER HAVING TAKEN NOTE OF THE DIRECTION OF THE LEAR NED CIT U/S.264 MADE NO ADDITION ON ACCOUNT OF CAPITAL BUT PROCEEDED TO ESTIMATE THE INCOME OF THE ASSESSEE AS AGAINST RETURNED INCOME BY REJECTING THE BOOKS OF ACCOUNT , @1% OF THE TOTAL SALES AMOUNTING TO 5,26,667. HE ALSO DISALLOWED THE ASSESSEE REBATE U/S.88C BEING A LADY AND DID NOT GIVE CREDIT TO THE DEDUCTION CLAIMED ON ACCRUED INTEREST FROM NSC U/S.80C. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO TOOK COGNIZANCE TO THE FACT THAT THE LEARNED CIT IN HIS ORDER U/S.264 HAS GIVEN NO DIRECTION TO THE ASSESSING OFFICER FOR ESTIMATING THE INCOME , WHICH ACTION OF THE LEARNED ASSESSING OFFICER HE JUSTIFIED BY CONFIRMING THE NET PROFIT AT 1%. HE ALSO CONFIRMED THE DENIAL OF REBATE U/S.88C AND U/S.80C OF THE I.T.ACT BY GIVING DIRE CTION TO THE ASSESSING OFFICER TO VERIFY THE SAME AND ACCORD THE SAME TO THE ASSESSEE AS PER INCOME - TAX PROVISIONS . 4. THE LEARNED COUNSEL FOR THE ASSESSEE HAS FURNISHED A COPY OF THE ASSESSEES FURNISHING OF RETURN OF INCOME FOR THE EARLIER TWO YEARS AND LATER TWO YEARS WHEREIN THE GROSS MARGIN ON THE TURNOVER OF PETROLEUM AND DIESEL HAS BEEN VARYING BETWEEN 1.5% TO 2%.HOWEVER, THE NET PROFIT WHICH THE ASSESSING OFFICER HAS SOUGHT TO CONSIDER AT 1% HAS BEEN RETURNED BETWEEN 0.1% TO 0.2%. HE POINTED OUT TH AT BY NO STRETCH OF IMAGINATION CAN THE ASSESSEE EARN TAXABLE INCOME IN DEALING IN PETROLEUM PRODUCTS OF GOVERNMENT AGENCIES MORE THAN WHAT COULD BE ASSIGNED TO THEM. IT WAS THEREFORE, THE CASE OF THE AO WITHOUT ANY BASIS DENYING THE ASSESSEE THE LEGITIMAT E CLAIM OF EXPENSES BEING A PETROL PUMP WHEN THE GROSS MARGIN VARYING BETWEEN 1.5% TO 2% HAS BEEN CONFIRMED AT 1% BY DENYING THE I.T.A.NO. 92/CTK/2010 3 LEGITIMATE EXPENSES TO THE ASSESSEE. HE SUBSTANTIATED THE SAME BY FURNISHING THE COPIES OF ASSESSMENT ORDERS AND FINANCIAL STAT EMENTS FOR THE EARLIER TWO YEARS AND THE LATER TWO YEARS WHICH NET PROFIT AND GROSS MARGIN HA VE BEEN ACCEPTED BY THE DEPARTMENT. SIMILARLY HE POINTED OUT THAT THE CLAIM OF THE ASSESSEE WITH RESPECT OF REBATE U/S.88C AND SECTION 80C HAS NOT BEEN ADJUDICATED UPON BY THE AUTHORITIES BELOW AS WAS CLAIMED IN THE LIGHT OF LEGAL PROVISIONS AND THE DENIAL THEREOF IS TO BE ON A SOUND FOOTING. THE LEARNED CIT(A) HAS ,HOWEVER, DIRECTED THE ASSESSING OFFICER TO ASCERTAIN THE CLAIM OF THE ASSESSEE FOR DENIAL OF DEDUCTIO N U/S.88C AND 80C BUT HAS GIVEN NO REASON IN CONFIRMING THE 1% NET PROFIT OF THE TURNOVER EXCEPT FOR THAT THE AO WAS WITHIN LEGITIMATE JURISDICTION TO ASSESS THE SAME AT 1% WHICH HE CONFIRMED. P ERUSING THE ORDER OF THE AO, HE SUBMITTED THAT THE AO AFTER HA VING DISCUSSED THE ORDER OF THE LEARNED CIT U/S.264 , WHICH ONLY ALLOWED HIM TO CONSIDER THE CAPITAL INTRODUCED BY THE ASSESSEE IN THE FIRM , OUGHT NOT TO HAVE PROCEEDED TO ESTIMATE THE INCOME WHICH HAS NO BEARING ON THE CAPITAL THEREBY GIVING NO REASON AT A LL TO ESTIMATE AT 1%. HE HAS ONLY NOTED THAT BOOKS OF ACCOUNT WERE REJECTED BY HIS PREDECESSOR ASSESSING OFFICER WHICH DOES NOT INDICATE NON - CLAIM OF THE EXPENSES WHICH ARE INCIDENTAL AND NECESSARILY TO BE INCURRED AS WAS ALSO CONSIDERED BY HIS PREDECESSOR ASSESSING OFFICER WHEN ONLY DISALLOWANCE OF EXPENSES WERE AGITATED BY WAY OF A PETITION/S.264 BEFORE THE LEARNED CIT. 5. THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW FOR HIS PART OF SUBMISSIONS. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND FORCE IN THE CONTENTION OF THE LEARNED COUNSEL FOR I.T.A.NO. 92/CTK/2010 4 THE ASSESSEE THAT THE REVENUE HAS RELIED ON THE FACT THAT OUT OF FIVE AYS WHICH THE LEARNED COUNSEL HAS RELIED WERE ON THE BASIS OF ACCEPTANCE OF THE FIN ANCIAL RESULT ASSESSED U/S.143(1). ON THE BASIS OF SAME SET OF FACTS, THEREFORE, INTERVENING ASSESSMENT YEAR COULD NOT SUFFER TAXABILITY UNLESS PECULIAR CIRCUMSTANCE REQUIRED THE AO TO ESTIMATE THE INCOME AT A HIGHER PERCENTAGE WHEN THE TURNOVER ALONE IS THE CRITERIA FOR COMPUTING INCOME OF A DEALER OF PETROLEUM PRODUCTS. THE ASSESSING OFFICER AND THE LEARNED CIT(A) HAVE GIVEN NO REASON TO ASSESS @ 1% OF THE TURNOVER AS NET PROFIT TOTALLY IGNORING THE CONTENTION OF THE COUNSEL FOR THE ASSESSEE THAT HAVING A CCEPTED THE DIRECT EXPENSES LIKE ELECTRICITY CHARGES, TELEPHONE CHARGES, COLLECTION CHARGES ETC., ONLY FOR PART DISALLOWANCE BY THE PREDECESSOR ASSESSING OFFICER WAS ON THE BASIS OF BOOKS OF ACC OUNT MAINTAINED BY THE ASSESSEE CANNOT BE LOST SIGHT FOR ANY PARTICULAR ITEM OF DISALLOWANCE . FINDING NO INFIRMITY IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE, WE DIRECT THE ASSESSING OFFICER TO ACCEPT THE TRADING RESULT AS RETURNED BY THE ASSESSEE. HOWEVER, ON THE ISSUE OF CLAIMING REBATE U/S.88C AND 80C, WE SUPPORT THE ORDER OF THE LEARNED CIT(A) WHO HAS DIRECTED THE AO TO VERIFY THE SAME AND GRANT THE LEGITIMATE REBATE AND DEDUCTION. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 25 TH FEBRUARY, 2011 SD/ - SD/ - ( . . . ) , ( K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DAT E: 25 TH FEBRUARY, 2011 ( ), ( H.K.PADHEE ), SENIOR.PRIVATE SECRETARY. I.T.A.NO. 92/CTK/2010 5 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : DR. SNEHALATA KANUNGO, PROP. M/S.KANUNGO & PARTNER S, AT: MAHIPAL, DIST. KENDRAPARA 2 / THE RESPONDENT: INCOME - TAX OFFICER,WARD 2, PARADEEP. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETARY