M/S Subarnrekha Coal Complex Pvt. Ltd., Kolkata V. DCIT, Central Circle-1, Ranchi

ITSSA 07/RAN/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6364 (ITAT-RANCHI)
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 10-09-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 07-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: INDRAJIT SINGH
• Keywords: Search and seizure
• Section: 133A; 234B; 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI E-COURTAT KOLKATA BEFORE SHRI S.S, GODARA, JM & DR. A.L. SAINI, AM IT(SS)A NO.07/RAN/2018 (ASSESSMENT YEAR: 2005-06) M/S SUBARNREKHA COAL COMPLEX PVT. LTD. 193, BISHNU RESIDENCY, NETAJI SUBHAS CHANDRA BOSE, KOLKATA-700040. VS. DCIT, CENTRAL CIRCLE-1, RANCHI ./ ./PAN/GIR NO. : AADCS7932D ( /APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY : SHRI DEVESH PODDAR, ADVOCATE RESPONDENT BY : SHRI INDRAJIT SINGH, CIT, DR / DATE OF HEARING : 22/07/2020 /DATE OF PRONOUNCEMENT : 10/09/2020 / O R D E R PER BENCH: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAINING TO ASSESSMENT YEAR 2005- 06, IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX(APPEALS)-3, PATNA DATED 05.07.2018 WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY ASSESSING OFFICER U/S 153A/143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS: 1. FOR THAT LD. CIT(A) WAS NOT JUSTIFIED IN MAKING AN ESTIMATE OF PROFIT @ 20% FOR COAL TRADING ON TURNOVER DISCLOSED BY THE APPELLANT AND ACCEPTED BY LD. AO. THE ESTIMATE OF PROFIT @ 20% AS MADE BY LD. CIT(A) IS UNJUSTIFIED, EXCESSIVE, ARBITRARY AND WITHOUT ANY BASIS. 2. FOR THAT APPELLANT FILED NUMBER OF DECISION OF HON'BLE ITAT BEFORE LD. AO AND LD. CIT(A) TO SUGGEST THAT PROFIT ON TRADING OF COAL IS NORMALLY 5 % TO 6% WHEREAS, APPELLANT SURRENDERED PROFIT OF 10% BEFORE HON'BLE SETTLEMENT COMMISSION, AS SUCH, PROFIT SURRENDERED BY THE APPELLANT FOR TAXATION SHOULD HAVE BEEN ACCEPTED. THE ESTIMATE MADE IS UNJUSTIFIED AND FIT TO BE DELETED. 3. FOR THAT DURING SEARCH AND SEIZURE OPERATION NO DOCUMENT RELATING TO PROFIT EARNED BY THE APPELLANT OR ANY UNDERSTATEMENT OF PROFIT WAS FOUND, AS SUCH, LD. CIT(A) WAS NOT IT(SS)A NO.07/RAN/2018 M/S SUBARNREKHA COAL COMPLEX PVT. LTD. ASSESSMENT YEAR: 2005-06 2 JUSTIFIED IN MAKING AN AD HOC ESTIMATE OF PROFIT THEREBY MAKING ADDITION TO THE TOTAL INCOME DISCLOSED. 4. FOR THAT INTEREST U/S 234A AND 234B SHOULD HAVE BEEN CHARGED ON THE RETURNED INCOME AND NOT ON THE ASSESSED INCOME FOLLOWING THE DECISION OF HON'BLE JHARKHAND HIGH COURT. 5. FOR THAT OTHER GROUNDS IN DETAIL WILL BE ARGUED AT THE TIME OF HEARING. 3. BRIEF FACTS QUA THE ISSUE ARE THAT IN THE CASE OF M/S. SUBARNAREKHA COAL COMPLEX PVT. LTD ( ASSESSEE), A SEARCH AND SEIZURE OPERATION WAS CONDUCTED U/S. 132(1) OF THE I.T. ACT ON 17/02/2010 IN THE OFFICE PREMISES LOCATED AT IC, GALAXY APARTMENT, BISTUPUR, JAMSHEDPUR. SUBSEQUENT TO THE SEARCH AND SEIZURE OPERATION SURVEY U/S. 133A OF THE I.T. ACT WAS ALSO CONDUCTED IN THE FACTORY PREMISES OF THE ASSESSEE COMPANY LOCATED AT NAINI BY THE ADIT (INV.), ALLAHABAD. THE ASSESSEE COMPANY IS PUBLIC LIMITED COMPANY, INCORPORATED ON 14/01/1993 AND AS PER AUDITED FINANCIAL STATEMENTS OF ACCOUNTS, THE ASSESSEE COMPANY HAS CLAIMED THAT IT IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF SPECIAL SMOKELESS FUEL, SALE OF UNDER SIZE COAL AND COAL TAR. CONSEQUENT UPON SEARCH AND SEIZURE OPERATION IN THE RESIDENTIAL AND VARIOUS OFFICE AND FACTORY PREMISES OF MANOHAR PAUL GROUP OF CASES, SHRI MRINAL KANTI PAUL, ONE OF THE SONS OF SHRI MANOHAR LAL PAUL, IN REPLY TO QUESTION NUMBER 20 OF THE STATEMENT RECORDED ON OATH U/S. 132(4) OF THE I.T. ACT ON 18/02/2010 HAD DISCLOSED UNDISCLOSED INCOME OF RS. 65 CRORE IN THIS GROUP OF CASES. FURTHER IN REPLY TO QUESTION NUMBER 21 OF THE STATEMENT THE BREAK-UP OF EARNING OF UNDISCLOSED INCOME OF RS.65 CRORE HAD ALSO BEEN STATED WHEREIN AN AMOUNT OF RS. 48 CRORES HAD BEEN DISCLOSED AS UNDISCLOSED INCOME EARNED BY THE ASSESSEE DURING THE FINANCIAL YEARS RELEVANT TO THE ASSESSMENT YEARS 2004-05 TO 2010-11. IN THE STATEMENT ON OATH RECORDED DURING THE COURSE OF SEARCH AND SEIZURE OPERATION, UNDISCLOSED INVESTMENT OUT OF THE UNDISCLOSED INCOME IN VARIOUS COMPANIES HAD ALSO BEEN STATED. THE STATEMENT GIVEN BY SRI MRINAL KANTI PAUL HAD BEEN APPROVED AND AGREED BY SHRI MANOHAR LAL PAUL AND HIS OTHER SONS, SRI TUSHAR KANTI PAUL AND SRI TARUN KANTI PAUL. HOWEVER, THROUGH AN AFFIDAVIT DATED 26/02/2010 SRI MRINAL KANTI PAUL RETRACTED FROM THE STATEMENT GIVEN ON 18/02/2010 U/S. 132(4) OF THE I.T. ACT DECLARING UNDISCLOSED INCOME EARNED BY THEM. FURTHER, DURING THE COURSE OF POST SEARCH INVESTIGATION, SRI IT(SS)A NO.07/RAN/2018 M/S SUBARNREKHA COAL COMPLEX PVT. LTD. ASSESSMENT YEAR: 2005-06 3 MRINAL KANTI PAUL, SRI TUSHAR KANTI PAUL AND SRI TARUN KANTI PAUL, THREE SONS OF SHRI MANOHAR LAL PAUL, SUBMITTED A WRITTEN SUBMISSION ON 02/08/2010 WHEREIN THEY HAVE GIVEN A YEAR-WISE BREAK UP OF EARNING OF UNDISCLOSED INCOME AND ITS INVESTMENT IN DIFFERENT COMPANIES. THIS BREAKUP IS FOR RS.65 CRORES DISCLOSED U/S 132(4) OF THE I.T. ACT BUT THE BREAKUP DOES NOT TALLY WITH THE BREAKUP GIVEN DURING THE COURSE OF STATEMENT GIVEN U/S 132(4) OF THE I.T. ACT. IN THE WRITTEN SUBMISSION FILED ON 02/08/2010, AN AMOUNT OF RS.14 CRORE HAS BEEN DISCLOSED AS UNDISCLOSED INCOME EARNED BY THE ASSESSEE COMPANY DURING THE ASSESSMENT YEAR 2009-10. 4. HOWEVER, WHILE FILING APPLICATION BEFORE THE HONBLE SETTLEMENT COMMISSION, THE ASSESSEE COMPANY HAS ADMITTED THAT THE COAL PURCHASED BY IT WAS SOLD OUTSIDE THE BOOKS AT PREVAILING MARKET RATE AND THE INCOME EARNED ON SALE OUTSIDE THE BOOK HAS BEEN OFFERED FOR TAXATION AS ITS ADDITIONAL INCOME. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY HAS ADMITTED THAT COAL WORTH RS.1,91,15,628/- WAS SUPPLIED BY BCCL, WHICH WAS SOLD AT RS.2,12,39,375/- IN THE OPEN MARKET AND ALSO REMAIN UNACCOUNTED. ON THE TOTAL UNACCOUNTED SALE OF RS. 2,12,39,375/, THE ASSESSEE COMPANY, BY ADOPTING PROFIT RATE OF 10%, DECLARED UNDISCLOSED PROFIT OF RS. 21,23,746/ AS ITS ADDITIONAL INCOME FOR THE YEAR UNDER CONSIDERATION. 5. AFTER GOING THROUGH THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY HAS NOT MANUFACTURED ANY SOFT COKE /SMOKELESS FUEL AND HAS SOLD THE ENTIRE COAL LIFTED FROM BCCL IN THE OPEN MARKET, WHICH IS ALSO STRENGTHENED FROM THE AUDITED ACCOUNT FOR THE FINANCIAL YEAR 2004-05 RELEVANT TO THE ASSESSMENT YEAR 2005-06 WHEREIN IT WAS FOUND THAT NO PRODUCTION OR SALES TOOK PLACE AND THERE IS NO OPENING STOCK, PURCHASE OR CLOSING STOCK DURING THE YEAR. THUS, THE ASSESSEE COMPANY HAS NOT TO BEAR ANY COST INCIDENTAL TO SALE. FURTHER, THE ASSESSING OFFICER NOTED THAT THE BASIS OF ADOPTION OF PROFIT RATE OF 10% ON THE TOTAL UNACCOUNTED SALE WITH REFERENCE TO THE BOOKS OF ACCOUNT HAS NOT BEEN FURNISHED BY THE ASSESSEE COMPANY DURING THE COURSE OF ASSESSMENT PROCEEDINGS. SINCE THE ENTIRE TRANSACTION WAS OUTSIDE THE BOOKS OF ACCOUNT AND THE BASIS ON WHICH THE PROFIT @ 10% ON UNACCOUNTED SALE OF RS. 2,12,39,375/- IT(SS)A NO.07/RAN/2018 M/S SUBARNREKHA COAL COMPLEX PVT. LTD. ASSESSMENT YEAR: 2005-06 4 DECLARED BY THE ASSESSEE COMPANY COULD NOT BE SUBSTANTIATED, THEREFORE, THE ASSESSING OFFICER CONSIDERED THE SAME TO BE ON LOWER SIDE. THE ASSESSING OFFICER WAS OF THE VIEW THAT EVEN IF MANUFACTURING / PRODUCTION DOES NOT TAKE PLACE, IT IS ASSUMED THAT SOME EXPENSES TO RUN THE ESTABLISHMENT MAY HAVE BEEN INCURRED AND HENCE PROFIT @ 40% OF UNACCOUNTED SALE OF RS. 2,12,39,375/- IS REASONABLY TAKEN AS UNACCOUNTED / UNDISCLOSED INCOME EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION FROM TRADING OF COAL BUSINESS, WHICH COMES TO RS.84,95,750/- INSTEAD OF RS. 21,23,746/- DECLARED BY ASSESSEE AS ITS ADDITIONAL INCOME FROM THE SAID BUSINESS. ACCORDINGLY AN ADDITION OF RS.63,72,004/- ( RS.84,95,750- RS. 21,23,746) WAS FURTHER ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 6.AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD CIT(A) WHO HAS RESTRICTED THE ESTIMATED PROFIT ON UNACCOUNTED SALES TO 20% FROM 40%. THE FINDINGS OF THE LD CIT(A) ARE AS FOLLOWS: 3.2.3 APPELLATE FINDING AND DECISION: ON PERUSAL OF THE FINDINGS OF THE AO AS WELL AS FROM THE SUBMISSIONS OF THE APPELLANT, IT IS SEEN THAT THE APPELLANT HAS ADMITTED BEFORE THE SETTLEMENT COMMISSION UNACCOUNTED PURCHASES OF COAL FROM BCCL OF RS.1,91, L5,628/- WHICH WAS SOLD AT RS.2,12,39,375/- IN THE OPEN MARKET AND ALSO REMAINED UNACCOUNTED. ON THE TOTAL UNACCOUNTED SALES OF RS.2,12,39,375/- THE APPELLANT COMPANY BY ADOPTING PROFIT RATIO OF 10% DECLARED UNDISCLOSED PROFIT OF RS.21,23,746 AS ITS ADDITIONAL INCOME FOR THE YEAR UNDER CONSIDERATION. HOWEVER, THE AO IN THE ASSESSMENT ORDER OPINED THAT, AS THE APPELLANT PURCHASED AND SOLD THE COAL OUTSIDE THE BOOKS OF ACCOUNT, THE BASIS FOR ADOPTING ONLY 10% OF PROFIT ON UNACCOUNTED SALES IS NOT SUBSTANTIATED BY THE APPELLANT, AND THEREFORE THE AO FELT THAT THE SAME WAS ON A LOWER SIDE AND ESTIMATED THE PROFIT AT 40% OF THE UNACCOUNTED SALES. ON THE OTHER HAND, THE APPELLANT CONTENDED THAT NET PROFIT OF 40% IS UNHEARD OF SO FAR AS COAL TRADING BUSINESS IS CONCERNED, AND THERE IS NO BASIS FOR THE AO TO ESTIMATE THE PROFIT AT 40% OF THE TURNOVER. THE APPELLANT FURTHER CONTENDED THAT IN NUMBER OF CASES IN WHICH SEARCH HAD TAKEN PLACE; ESTIMATE OF PROFIT OF TRADING WAS ACCEPTED IN THE RANGE OF 3-5% AND THAT OF MANUFACTURING IN THE RANGE OF 10-12%. IN SUPPORT OF THE SAME THE APPELLANT RELIED ON THE DECISION OF HON'BLE ITAT, RANCHI BENCH IN THE CASE OF PRAKASH KUMAR AGARWAL VS. ACIT, CENTRAL CIRCLE, DHANBAD IN IT(SS).A. NOS. 1,2,3 & 4/RAN/2012 DATED 16/10/2012 AND IN THE CASE OF RAKESH KUMAR AGARWAL VS. ACIT, CENTRAL CIRCLE, DHANBAD IN I T.A. NOS.5,6,7 & 8/RAN/2012 DATED 19/10/2012 WHEREIN THE HON'BLE ITAT HAS ACCEPTED THE PROFIT FROM COAL TRADING BUSINESS BETWEEN 7-8%. IT(SS)A NO.07/RAN/2018 M/S SUBARNREKHA COAL COMPLEX PVT. LTD. ASSESSMENT YEAR: 2005-06 5 AS CAN BE SEEN FROM THE ABOVE DISCUSSION, NEITHER THE ESTIMATION ARRIVED AT 40% BY THE AO NOR BY THE APPELLANT AT 10% HAVE NO BASIS IN VIEW OF NON-MAINTENANCE OF BOOKS OF ACCOUNTS BY THE APPELLANT. HOWEVER, ON FURTHER PERUSAL OF ASSESSMENT ORDERS FOR A.Y.2005-06, 2006-07, 2007- 08 AND 2009-10 IN THE CASE OF THE APPELLANT, IT IS SEEN THAT THE PROFIT PERCENTAGE DISCLOSED BY THE APPELLANT BEFORE THE SETTLEMENT COMMISSION IS AS UNDER: A.Y.2004-05 A.Y.2005-06 A.Y.2006-07 A.Y.2007-08 A.Y.2009-10 10% 10% 15% 15% 20% FROM THE ABOVE TABLE, THE APPELLANT ITSELF ADMITTED PROFIT RANGING BETWEEN 10-20% BEFORE THE SETTLEMENT COMMISSION. HENCE, TAKING INTO ACCOUNT OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, AND ALSO TO DELIVER REASONABLE JUSTICE TO BOTH THE PARTIES, THE AO IS DIRECTED TO ESTIMATE THE PROFIT AT 20% INSTEAD OF 40% OF THE UNACCOUNTED SALES. 7. AGGRIEVED BY THE ORDER OF THE LD CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 8. WE HEARD BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCUMENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACT OF THE CASE INCLUDING THE FINDINGS OF THE LD CIT(A) AND OTHER MATERIALS BROUGHT ON RECORD. LEARNED COUNSEL FOR THE ASSESSEE SUBMITS BEFORE US THAT THERE IS HARDLY A PROFIT IN THE COAL BUSINESS, THE AVERAGE PROFIT IN THE COAL BUSINESS RANGES BETWEEN 5% TO 10%, THEREFORE THE PROFIT SHOULD BE ESTIMATED @10% ON UNACCOUNTED SALES/TURNOVER. HOWEVER, LD DR FOR THE REVENUE SUBMITS THAT DURING THE APPELLATE PROCEEDINGS, LD CIT(A) HAS ESTIMATED PROFIT @ 20% WHICH IS QUITE REASONABLE AND THE SAME SHOULD BE SUSTAINED. WE NOTE THAT THE PROFIT PERCENTAGE DISCLOSED BY THE ASSESSEE BEFORE THE SETTLEMENT COMMISSION IS AS FOLLOWS: A.Y.2004-05 A.Y.2005-06 A.Y.2006-07 A.Y.2007-08 A.Y.2009-10 10% 10% 15% 15% 20% IT(SS)A NO.07/RAN/2018 M/S SUBARNREKHA COAL COMPLEX PVT. LTD. ASSESSMENT YEAR: 2005-06 6 THE AVERAGE PROFIT OF THESE FIVE YEARS COMES @ 14%. IT IS WELL SETTLED THAT IN THESE TYPE OF CASES THERE IS ALWAYS A CERTAIN DEGREE OF GUESSWORK. NO DOUBT THE AUTHORITIES CONCERNED SHOULD TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME AND THEY SHOULD NOT ACT TOTALLY ARBITRARILY. DEPARTMENT MUST ACT JUDICIOUSLY AND MUST BE GUIDED BY JUDICIAL CONSIDERATION AND BY RULE OF JUSTICE, EQUITY AND GOOD CONSCIENCE. AND ALSO THAT THERE MUST BE HONEST AND FAIR ESTIMATE OF THE PROPER FIGURE OF ASSESSMENT, FOR WHICH CONSIDERATION OF LOCAL KNOWLEDGE AND REPUTE, BESIDES THE PREVIOUS RETURNS AN ASSESSMENT OF THE ASSESSEE CONCERNED, AND ALL OTHER MATTERS MUST BE TAKEN INTO ACCOUNT FOR FAIR AND PROPER ESTIMATE WHICH OF COURSE, WOULD FALL IN THE CATEGORY OF ESTIMATE/GUESSWORK, BUT A HONEST ESTIMATE/GUESSWORK. WE NOTE THAT ASSESSEE`S AVERAGE PROFIT FOR FIVE YEARS, AS NOTED ABOVE, COMES @ 14% WHICH IS FAIR AND PROPER TO ESTIMATE THE INCOME ON UNACCOUNTED SALES/TURNOVER. THUS, WE ARE OF THE VIEW THAT IT IS REASONABLE AND FAIR IF THE PROFIT MAY BE ESTIMATED @14% OF THE TURNOVER. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO ESTIMATE THE PROFIT @ 14% ON UNACCOUNTED SALES/TURNOVER. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10/09/2020. SD/- (S. S. GODARA) SD/- (A. L. SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; DATED: 10/09/2020 RS / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S SUBARNREKHA COAL COMPLEX PVT. LTD. 2. /RESPONDENT- DCIT, CENTRAL CIRCLE-1, RANCHI IT(SS)A NO.07/RAN/2018 M/S SUBARNREKHA COAL COMPLEX PVT. LTD. ASSESSMENT YEAR: 2005-06 7 3. / CONCERNED CIT 4. - / CIT (A) 5. , / DR, ITAT, 6. [ / GUARD FILE. // TRUE COPY// BY ORDER/ , SR. PRIVATE SECRETARY