DCIT, Berhampur Circle, Berhampur, Berhampur V. M/s. SSSOM and SSSMD Industries, Koraput

ITSSA 16/CTK/2014

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 3250 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-05-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 18-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KUNAL SINGH
• Assessee Lawyers: D K SHETH
• Keywords: Business income; Search and seizure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ( CUTTACK BENCH, CUTTACK ) BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH , JUDICIAL MEMBER I T ( S S) A . N O . 16 / CTK/2014 (ASSESSMENT YEAR : 20 09 - 1 0 ) A CIT, BERHAMPUR, CIRCLE, VS. M/S. SSSOM AND SSSMD INDUSTR IES, BERHAMPUR (ODISHA) . M.G. ROAD, JEYPORE, ODISHA. ( PAN : AAVFS9340Q ) IT(SS) A.NO.271/CTK/2014 (ASSESSMENT YEAR : 2009 - 10) M/S. SSSOM AND SSSMD INDUSTRIES, VS. A CIT, BERHAMPUR, CIRCLE, M.G. ROAD, JEYPORE, BERHAMPUR (ODISHA). ODISHA. ( PAN : AAVFS9340Q ) CO NO.34/CTK/2014 (IN IT(SS) A.NO.16/CTK/2014) (ASSESSMENT YEAR : 2009 - 10) M/S. SSSOM AND SSSMD INDUSTRIES, VS. A CIT, BERHAMPUR, CIRCLE, M.G. ROAD, JEYPORE, BERHAMPUR (ODISHA) ODISHA. ( PAN : AAVFS9340Q ) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI D.K.SHETH , AR REVENUE BY : SHRI KUNAL SINGH , CIT DR D ATE OF HEARING : 2 7 . 0 4 .2017 DATE OF PRONOUNCEMENT : 29 . 0 5 .2017 ITA NO .16 / CTK ./2014 ITA NO .271/CTK./2014 CO NO.34/CTK/2014 2 O R D E R PER KULDIP SINGH , JUDICIAL MEMBER : THE AFORESAID CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE AND ALSO CROSS OBJECTION FILED BY THE ASSESSEE ARE BEING DISPOSED OFF BY WAY OF CONSOLIDATED ORDER TO AVOID REPETITION OF DISCUSSION. 2. THE APPELLANT, ASSISTANT COMMISSIONER OF INCOME - TAX, BERHAMPUR CIRCLE, BERHAMPUR (HEREINAFTER REFERR ED TO AS THE REVENUE) IN ITA NO.16/CTK/2014 BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 14.03.2014 PASSED BY THE COMMISSIONER OF INCOME - TAX (APPEALS), BERHAMPUR, ODISHA QUA THE ASSESSMENT YEAR 200 9 - 1 0 ON THE GROUND S INTER AL IA THAT : - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) WAS NOT JUSTIFIED IN ACCEPTING THE CONTENTION OF THE ASSESSEE AND DELETING RS.1,23,82,764/ - OUT OF THE ADDITION MADE BY THE AO ON ACCOUNT OF UNDISCLOSED SALES OF THE ASSESSEE, W HEN THERE WAS NO EVIDENCE THAT EXPENSES AGAINST THE SALES WERE NOT ALREADY CLAIMED BY THE ASSESSEE. 3. THE APPELLANT, M/S. SSSOM AND SSSMD INDUSTRIES (HEREINAFTER REFERRED TO AS THE ASSESSEE) IN ITA NO.271/CTK/2014 BY FILING THE PRESENT APPEAL SOUGHT T O SET ASIDE THE IMPUGNED ORDER DATED 14.03.2014 PASSED BY THE COMMISSIONER OF INCOME - TAX (APPEALS), BERHAMPUR, ODISHA QUA THE ASSESSMENT YEAR 200 9 - 1 0 ON THE GROUND S INTER ALAI THAT : - ITA NO .16 / CTK ./2014 ITA NO .271/CTK./2014 CO NO.34/CTK/2014 3 1. FOR THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED A .O. IS NOT JUSTIFIED TO TREAT THE INCOME OF RS.2,96,000/ - AS INCOME FROM INTEREST (OTHER SOURCES) INSTEAD OF INCOME FROM BUSINESS AND THEREBY DISALLOWING THE CLAIM OF REMUNERATION TO PARTNERS. 2. FOR THAT THE LEARNED A.D. AS - WELL - AS THE LEARNED COMMISS IONER SHOULD HAVE ACCEPTED THE CONTENTION OF THE APPELLANT. 3. FOR THAT THE LEARNED COMMISSIONER IS NOT JUSTIFIED TO CONFIRM THE VIEW OF THE LEARNED A.D. TO DETERMINE THE SUM OF RS.1,58,75,339/ - AS UNDISCLOSED SALES. 4. FOR THAT THE LEARNED COMMISSIONE R IS ALSO NOT JUSTIFIED TO APPLY 22% RATE OF PROFIT TO DETERMINE UNDISCLOSED INCOME FROM THE AFORESAID UNDISCLOSED SALES. 4 . THE OBJECTOR, BY FILING THE PRESENT CROSS OBJECTION, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 14.03.2014 PASSED BY THE COMMI SSIONER OF INCOME - TAX (APPEALS), BERHAMPUR, ODISHA QUA THE ASSESSMENT YEAR 2009 - 10 ON THE GROUNDS INTER ALIA THAT : - 1. FOR THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED A.O. IS NOT JUSTIFIED TO TREAT THE INCOME OF RS.2,96,000/ - AS INCOM E FROM INTEREST (OTHER SOURCES) INSTEAD OF INCOME FROM BUSINESS AND THEREBY DISALLOWING THE CLAIM OF REMUNERATION TO PARTNERS. 2. FOR THAT THE LEARNED A.D. AS - WELL - AS THE LEARNED COMMISSIONER SHOULD HAVE ACCEPTED THE CONTENTION OF THE APPELLANT. 3. FO R THAT THE LEARNED COMMISSIONER IS NOT JUSTIFIED TO CONFIRM THE VIEW OF THE LEARNED A.D. TO DETERMINE THE SUM OF RS.1,58,75,339/ - AS UNDISCLOSED SALES. 4. FOR THAT THE LEARNED COMMISSIONER IS ALSO NOT JUSTIFIED TO APPLY 22% RATE OF PROFIT TO DETERMINE UN DISCLOSED INCOME FROM THE AFORESAID UNDISCLOSED SALES. 5 . BRIEFLY STATED FACTS NECESSARY FOR ADJUDICATION OF THE CONTROVERSY AT HAND ARE: PURSUANT TO THE SEARCH AND SEIZURE ITA NO .16 / CTK ./2014 ITA NO .271/CTK./2014 CO NO.34/CTK/2014 4 OPERATION CONDUCTED AT THE BUSINESS AS WELL AS RESIDENTIAL PREMISES OF THE ASSESS EE ON 21.01.2009, THE RETURN OF INCOME WAS FILED ON 28.09.2009 DISCLOSING TOTAL INCOME OF RS.3,33,730/ - . ASSESSING OFFICER, FROM THE VERIFICATION OF THE SEIZED DOCUMENT HAVING MARKED AS SSSOM - 19 AT PAGE 7 NOTICED AN ENTRY OF RS.1,58,75,339/ - WRITTEN ON TH E BOTTOM OF THE PAGE. THE SAID AMOUNT PERTAINED TO THE SALES TO VARIOUS PARTIES DURING OCTOBER, NOVEMBER AND DECEMBER. ASSESSEE BY RELYING UPON PAGES 11, 12, & 13 OF SSOM - 19 SOUGHT TO RECONCILE THE AMOUNT BUT THE AO, BEING NOT SATISFIED, MADE AN ADDITION OF AN AMOUNT OF RS.1,58,75,339/ - AS UNDISCLOSED SALES. 6 . ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT (A) BY FILING AN APPEAL WHO HAS RESTRICTED THE ADDITION TO RS.34,92,575/ - BY ESTIMATING THE PROFIT ON DISCLOSED SALES OF RS.1,58,75,339/ - @ 22%. FEE LING AGGRIEVED, BOTH THE ASSESSEE AS WELL AS REVENUE HAS COME UP BEFORE THE TRIBUNAL BY FILING THE PRESENT CROSS APPEALS CHALLENGING THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) . 7 . WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APP EAL, GONE THROUGH THE DOCUMENTS RELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO .16 / CTK ./2014 ITA NO .271/CTK./2014 CO NO.34/CTK/2014 5 8. UNDISPUTEDLY, THE ENTIRE ADDITION OF RS.1,58,75,339/ - HAS BEEN MADE BY THE AO ON ACCOUNT OF UNDISCLOS ED SALES MADE TO THE PARTIES ON FAILURE OF THE ASSESSEE TO TALLY THE FIGURE WRITTEN UP TO THE LAST DIGIT OF PAISA WITH AGGREGATE OF RECEIVABLES FURNISHED BY THE ASSESSEE. THE LD. AR FOR THE ASSESSEE CHALLENGING THE IMPUGNED ORDER CONTENDED THAT THE ENTIRE ADDITION HAS BEEN MADE ON THE BASIS OF ESTIMATION AND GUESSWORK BY THE AO AND LD. CIT (A) HAS SUSTAINED THE ADDITION TO THE TUNE OF RS.34,92,575/ - AGAIN BY ESTIMATING @ 22% ADOPTED BY THE AO IN M/S. BHASKAR TRADERS AND CONSIDERING THE GROSS PROFIT RATE OF 22% DISCLOSED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE LD. AR CONTENDED THAT THE ENTIRE ADDITION IS LIABLE TO BE DELETED OR IN THE ALTERNATIVE, NET PROFIT BE APPLIED ON THE ALLEGED UNDISCLOSED SALES IN VIEW OF THE DECISION RENDERED BY HONBLE MADHYA PRADESH HIGH COURT IN JUDGMENT CITED AS CIT VS. BALCHAND AJIT KUMAR 263 ITR 610 (MP) . 9. HOWEVER, ON THE OTHER HAND, LD. DR FOR THE REVENUE TO REPEL THE ARGUMENTS ADDRESSED BY THE ASSESSEE CONTENDED THAT T HE ENTIRE ADDITION MADE BY THE AO BE RESTORED AND RELIED UPON THE ORDER PASSED BY THE AO. ITA NO .16 / CTK ./2014 ITA NO .271/CTK./2014 CO NO.34/CTK/2014 6 10. THE RATIO OF THE JUDGMENT IN CIT VS. BALCHAND AJIT KUMAR (SUPRA) IS THAT THE TOTAL UNDISCLOSED SALES OF RS.1,58,75,339/ - IN THIS CASE COULD NOT BE RECORDED AS PRO FIT OF THE ASSESSEE. THE NET PROFIT RATE HAD TO BE ADOPTED AND ONCE IT WAS ADOPTED, IT COULD NOT BE SAID THAT THERE WAS PERVERSITY OF APPROACH. WHETHER THE RATE WAS LOW OR HIGH WOULD DEPEND ON EACH CASE. WHILE FOLLOWING THE AFORESAID DECISION RENDERED B Y HONBLE MADHYA PRADESH HIGH COURT IN CIT VS. BALCHAND AJIT KUMAR (SUPRA), THE LD. CIT (A) ESTIMATED THE PROFIT @ 22% AND WORKED OUT ADDITION TO THE TOTAL INCOME OF THE ASSESSEE TO THE TUNE OF RS.34,92,575/ - . 11. FOLLOWING THE LAW LAID DOWN BY HONBLE MAD HYA PRADESH HIGH COURT IN CIT VS. BALCHAND AJIT KUMAR (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT TOTAL SALES OF RS.1,58,75,339/ - CANNOT REPRESENT THE INCOME OF ASSESSEE ON ACCOUNT OF UNDISCLOSED SALES WHICH IS PRICE RECEIVED BY THE SELLER OF THE GOODS FOR THE ACQUISITION OF WHICH THE ASSESSEE HAS ALREADY INCURRED THE COST. SO, IN THE GIVEN CIRCUMSTANCES, THE ONLY WAY OUT IS TO ADOPT THE NET PROFIT BY THE REVENUE AUTHORITIES, BUT THE SAME HAS TO BE ADOPTED JUDICIOUSLY IN THE FACTS AND CIRCUMSTANCES OF THE CASE. IN THE INSTANT CASE, THERE IS NOT AN IOTA OF EVIDENCE ON FILE AS TO HOW THE NET PROFIT IS ESTIMATED AT EXORBITANT RATE OF 22%. ASSESSEE CANNOT ITA NO .16 / CTK ./2014 ITA NO .271/CTK./2014 CO NO.34/CTK/2014 7 BE C OMPARED BROADLY WITH M/S. BHASKAR TRADERS WHICH HAS SHOWN GROSS PROFIT @ 22%. SO, KEEPING IN VIEW TH E NET PROFIT SHOWN BY THE ASSESSEE IN THE EARLIER YEAR @ 16%, WE DO NOT FIND ANY EVIDENCE ON RECORD TO REACH AT THE CONCLUSION THAT IN THE NEXT YEAR, NET PROFIT IS INCREASED BY 6%. SO, IN THESE CIRCUMSTANCES, WE FIND IT APPROPRIATE TO ESTIMATE THE NET PRO FIT @ 16% ON THE UNDISCLOSED SALES OF RS.1,58,75,339/ - . 12. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, BOTH THE APPEALS FILED BY THE REVENUE AS WELL AS ASSESSEE ARE PARTLY ALLOWED. 13. CROSS OBJECTION FILED BY THE ASSESSEE RAISING IDENTICAL GROUNDS AS HAS B EEN RAISED IN APPEAL BEARING NO. IT(SS) A.NO.271/CTK/2014 BY THE ASSESSEE IS HEREBY DISMISSED HAVING BEEN BECOME INFRUCTUOUS AS THE GROUNDS RAISED IN THE CROSS OBJECTION HAVE BEEN DECIDED IN THE APPEAL FILED BY THE ASSESSEE. ORDER PRONOUNCED IN OPEN COUR T ON THIS 29 TH DAY OF MAY , 201 7 . SD/ - SD/ - ( N.S. SAINI ) ( KULDIP SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 29 TH DAY OF MAY , 201 7 TS ITA NO .16 / CTK ./2014 ITA NO .271/CTK./2014 CO NO.34/CTK/2014 8 COPY OF THE ORDER FORWARDED TO: 1.APPELLANT - M/S. SSSO M AND SSSMD INDUSTRIES, M.G. ROAD, JEYPORE, ODISHA. 2.RESPONDENT - ACIT, BERHAMPUR, CIRCLE, BERHAMPUR (ODISHA). 3.CIT 4.CIT (A) , CUTTACK. 5.DR (ITAT), CUTTACK . 6. GUARD FILE //TRUE COPY// BY ORDER SR. PRIVATE SECRETARY , ITAT , CUTTACK