M/s. Yazdani International Pvt. Ltd, Bhubaneswar V. ACIT, Circle-1(2), Bhubaneswar, Bhubaneswar

ITSSA 18/CTK/2013

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3775 (ITAT-CUTTACK)
• Duration Of Justice: 9 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-06-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 09-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SUNIL KUMAR MISHRA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BEFORE AND ARUN KHODPIA, ACCOUNTANT MEMBER M/s. Yazdani International Pvt Ltd., 7 th floor, ‘C’ Wing, Fortune Tower, Chandrasekharpur, Bhubaneswar. PAN/GIR No. (Appellant ACIT, Circle-1(2), Bhubaneswar PAN/GIR No. (Appellant Per Bench The cross against the order No.0235/10-11 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI GEORGE MATHAN, JUDICIAL AND ARUN KHODPIA, ACCOUNTANT MEMBER IT(ss)A Nos.18 & 19/CTK/2013 Assessment Years : 2008-09 & 2009 M/s. Yazdani International Pvt floor, ‘C’ Wing, Fortune Tower, Chandrasekharpur, Bhubaneswar. Vs. ACIT, Circle Bhubaneswar. No.AAACY 2872 M (Appellant) .. ( Respondent IT(ss)A Nos.45 & 46/CTK/2013 Assessment Years : 2008-09 & 2009 1(2), Bhubaneswar Vs. M/s. Yazdani International Pvt Ltd., 7 th floor, ‘C’ Wing, Fortune Tower, Chandrasekharpur, Bhubaneswar. PAN/GIR No. AAACY 2872 M (Appellant) .. ( Respondent Assessee by : Shri Sunil Kumar Mishra Revenue by : Shri M.K.Gautam, CIT ( Date of Hearing : 28/6 Date of Pronouncement : 28/ O R D E R The cross appeals filed by the assessee and revenue are directed order dated 6.2.2013 of the CIT(A)-1 Bhubaneswar 11 for the assessment year 2008-09. Page1 | 8 IN THE INCOME TAX APPELLATE TRIBUNAL, JUDICIAL MEMBER AND ARUN KHODPIA, ACCOUNTANT MEMBER 18 & 19/CTK/2013 09 & 2009-10 ACIT, Circle-1(2), Bhubaneswar. Respondent) 46/CTK/2013 09 & 2009-10 M/s. Yazdani International Pvt floor, ‘C’ Wing, Fortune Tower, Chandrasekharpur, Bhubaneswar. Respondent) Sunil Kumar Mishra, AR CIT (DR) 6/ 2022 /6/2022 and revenue are directed Bhubaneswar in Appeal Page2 | 8 2. Similarly, the cross appeals filed by the assessee and revenue are directed against the order dated 15.2.2013 of the CIT(A)-1 Bhubaneswar in Appeal No.0236/10-11 for the assessment year 2009-10. 3. As the issues raised in all these appeals are common, therefore, they are clubbed together and are being disposed of by this common order for the sake of convenience. 4. Shri M.K.Gautam, ld CIT DR appeared on behalf of the revenue and Shri Sunil Kumar Mishra, ld AR appeared on behalf of the assessee. 5. It was submitted by ld AR that there was a search on the premises of the assessee on 28.5.2008. In the course of search, books of account of the assessee had been seized from the business premises of the assessee as also the premises of the assessee’s chartered accountant. After substantial litigation before the Hon’ble Jurisdictional High Court of Orissa and Hon’ble Supreme Court, copies of the books of account of the assessee had been provided to the assessee. It was the submission that on account of non-availability of books of account, the assessee was unable to cooperate fully before the Assessing Officer. This has resulted in assessment u/s.144 of the Act on 29.9.2010. It was submitted that on appeal before the ld CIT(A), the assessee was able to have the audit report dated 28.3.2011 prepared u/s.44AB of the Act. It was an admitted fact that the audit report was not before the Assessing officer when the assessment Page3 | 8 was done but was produced before the ld CIT(A) in the course of appellate proceedings. The audit report of the assessee alongwith other details filed were sent by the ld CIT(A) for multiple remand reports from the Assessing Officer. The Assessing Officer opined in the remand report that the incomes offered by the assessee in the audit report being higher than the income determined by the Assessing Officer in the assessment order, the incomes offered by the assessee in the audit report was to adopt by the ld CIT(A). In respect of expenditures, the AO in the remand report had submitted that the expenditures as determined by the AO being lower than the expenditures as claimed by the assessee in the audit report, the expenditure was liable to be limited to that extent as determined by the AO. It was the submission that the ld CIT(A) had called for three remand reports and the stand of the AO remained the same. The ld CIT(A), however, while adjudicating the issue held that either the audit report figures were to be adopted in its entirety or the figures adopted in the assessment order had to be adopted in its entirety. Consequently, ld CIT(A) held that as the incomes offered by the assessee in the audit report were high, the incomes as disclosed in the audit report can be considered and as income. The expenditure as claimed against such income was also liable to be allowed even though, it was higher than that as determined by the AO. However, ld CIT(A) went a step ahead on account of non-verifiability of all the expenditures, directed 10% disallowance under the head Page4 | 8 “administrative expenses” and 20% against the commission expenses. Against the disallowance of 10% of administrative expenses and 20% of commission expenses, the assessee has filed appeal and against the allowance of expenses as per the audit report, the revenue is in appeal. It was the submission that the assessee has raised substantial number of technical grounds in its appeal being Ground Nos.1 to 7. Ld counsel submitted that the assessee has instructed him not to prosecute the same and consequently, the technical grounds may be dismissed. It was the submission that no specific defect in the accounts as maintained by the assessee in respect of audit report has been pointed out and, therefore, the disallowance of 10% of administrative expenses and 20% of the commission expenses is liable to be deleted. 6. In reply, ld CIT DR submitted that at the outset the expenses as claimed by the assessee in its audit report have not been examined. It was the submission that more specifically the excess of the expenditure as claimed by the assessee in its audit report over and above what has been determined by the AO had not gone under verification. It was the submission that in the absence of verification of expenses, the whole of the expenses was liable to be disallowed and not just 10% out of administrative expenses and 20% out of commission expenses. It was the submission that the ld CIT (A) had also not undertaken any action to examine the genuineness of the expenses. It was the submission that to such extent the Page5 | 8 AO has verified and quantified the expenses as per seized material, the same were allowable. It was the submission that the AO in the remand proceedings had categorically taken a stand that the expenses as claimed by the assessee in the audit report were higher than that determined by the AO in the assessment proceedings and consequently, only to that extent what have been quantified by the AO in the assessment proceedings was liable to be considered. He vehemently supported the order of the AO. It was the submission that in regard to issue of allowance of the expenses, the order of the ld CIT(A) is liable to be reversed. 7. We have considered the rival submissions. Admittedly, the audit report was not available when the assessment was done. The audit report was for the first time produced before the ld CIT(A). It is also an admitted fact that the audit report showed higher income than the income as determined by the AO in the assessment. The said incomes were also in relation to the heads under which the AO had himself considered and the incomes disclosed in the audit report included the incomes from other business, which were not known to the AO during the course of assessment proceedings. In the same manner, the expenses claimed in the remand report were higher than that as examined by the AO. It is an admitted fact that just because the audit has been done, it does not mean that all the incomes and expenditures are fully verified. It is still open for the examination. A perusal of the order of the ld CIT(A), where he has Page6 | 8 discussed the remand report of the Assessing Officer, most specifically at page 9 of the order of the ld CIT(A) for the assessment year 2008-09, though the AO is asking for the expenses to be restricted to that extent as determined by the AO, a corresponding perusal of the order of the AO being assessment order does not show the determination of any expenses. Obviously, restricting the expenses as determined by the AO is not a practical method. At page 5 of the assessment order, the AO has recasted the trading and profit and loss account. This recasting trading and profit & loss account is only in respect of purchase and sale of the traded items. It does not have any expenses in relation to the commission income and other incomes as offered in the audit report. The incomes disclosed by the assessee in the audit report under other heads and other activities would also admittedly bear the corresponding expenses. It cannot be said that the assessee has earned income without incurring any expenses. The reasonableness of the said expenditures was very much before the AO in the remand proceedings. There is no whisper by the AO that the expenses claimed was unreasonable. The only claim of the AO is that the expenses are unverified. Here what is to be seen that the audit report is prepared on the basis of the seized materials provided to the assessee. Therefore, the details of these expenses are also available with the AO in the seized materials. This being so, we are of the view that the ld CIT(A) was right on the facts of the present case in accepting the entirety of the audit report on Page7 | 8 account of acceptance of the higher income disclosed by the assessee in its audit report and corresponding expenses relatable to the earning of such income in the audit report. This being so, we are also in agreement with the action of the ld CIT(A) in restricting the disallowance of the expenses under the head “administrative expenses” to 10% and commission expenses to 20% on account of possible non-verifiability of the expenses. We find that the ld CIT(A) has been reasonable on the facts of the case and also considering the fact that more than 15 years have passed and at this point, it would be practically impossible to do any examination or verification in respect of each of the expenses. We uphold the order of the ld CIT(A). No other grounds have specifically been argued in any of the four appeals. Consequently, the appeals of the assessee as well as the revenue are dismissed. 8. In the result, both the appeals of the assessee and revenue are dismissed. Order dictated and pronounced in the open court on 28/6/2022. Sd/- sd/- (Arun Khodpia) (George Mathan) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 28/06/2022 B.K.Parida, SPS (OS) Page8 | 8 Copy of the Order forwarded to : By order Sr.Pvt.secretary ITAT, Cuttack 1. The Assessee : M/s. Yazdani International Pvt Ltd., 7 th floor, ‘C’ Wing, Fortune Tower, Chandrasekharpur, Bhubaneswar 2. The Revenue: ACIT, Circle-1(2), Bhubaneswar. 3. The CIT(A)-1, Bhubaneswar 4. Pr.CIT-1, Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//