M/s F Serajuddin Exports (P) Ltd, Bhubaneswar V. ACIT, Bhubaneswar

ITSSA 23/CTK/2013

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3638 (ITAT-CUTTACK)
• Duration Of Justice: 9 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 06-07-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 21-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 69C; 69A; 44AB

Judgement Text

आयकर अपीऱीय अधिकरण, कटक न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK श्री जाजज माथन, न्याययक सदस्य एवं श्री अरुण खोड़पऩया ऱेखा सदस्य के समक्ष । BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER IT(SS)A Nos.23&24/CTK/2013 (नििाारण वषा / Asses s m ent Years :2008-2009 & 2009-2010) M/s F.Sera juddin E xpo rts (P ) Ltd., 7 th Floo r, Fortune T o wer, Bhubanes war P AN No. AAB C F 14 69 J ... ... ... ... .... . As s e s s e e Versus ACIT , Ci rc le-1(2 ), Bhubanes war ..................Re ve n u e AND IT(SS)A Nos.43/CTK/2013 (नििाारण वषा / Asses s m ent Year :2008-2 009) ACIT , Ci rc le-1(2 ), Bhubanes war ..................Re ve n u e Versus M/s F.Sera juddin E xpo rts (P ) Ltd., 7 th Floo r, Fortune T o wer, Bhubanes war P AN No. AAB C F 14 69 J ... ... ... ... .... . As s e s s e e Shri Sunil Mishra, Advocate for the assessee Shri M.K.Gautam, CIT-DR for the Revenue Date of Hearing : 07/07/2022 Date of Pronouncement : 07/07/2022 आदेश / O R D E R Per Bench : The assessee has filed two appeals i.e. IT(SS)A Nos.23&24/CTK/2013 against the separate order passed by the ld. CIT(A)-1, Bhubaneswar, both dated 20.02.2013 in I.T.Appeal IT(SS)A Nos.23, 24 & 43/CTK/2013 2 Nos.0237&0238/2010-11, for the assessment years 2008-09 & 209-10. The revenue has filed an appeal being IT(SS)A No.43/CTK/2013 against the order of the ld. CIT(A)-1, Bhubaneswar in ITAppeal No.0237/10-11, dated 20.02.2013 for the assessment year 2008-2009. 2. Since the issues involved in all the three appeals are identical, except difference in figures, therefore, the facts and grounds mentioned in IT(SS)A No.43/CTK/2013 for the assessment year 2008-2009 shall be taken into consideration for deciding all the appeals and the final outcome of the same will apply mutatis mutandis to the other appeals also. 3. It must be mentioned here that for the assessment year 2009-2010, there is a revenue’s appeal but the same was dismissed on account of tax effect. 4. It is submitted by the ld. CIT-DR that there was a search on the premises of the assessee on 28.05.2008. The books of accounts were found to be incomplete. Notice u/s.153A of the Act was issued on 03.03.2010 and served on 05.03.2010. It was the submission that Xerox copy of the seized documents were provided to the assessee as mentioned in the assessment order at page 2. It was the submission that no returns were filed and there was no cooperation from the side of the assessee and this resulted into the assessment being passed u/s.144 r.w.s.153A of the Act on 29.12.2010. It was the submission that as there was no cooperation from the assessee the AO had written letter to the IT(SS)A Nos.23, 24 & 43/CTK/2013 3 Asst. Commissioner (Customs), who on reply stated that there was export sales by the assessee to an extent of Rs.14.38 crores. It was clearly agreed by the ld. CIT-DR that subsequently a clarification was issued by the Assistant Commissioner (Customs) intimating that the sales as intimated by him in respect of the assessee, in fact, did not belong to the assessee but belonged to Serajuddin Company Pvt. Ltd. and Yazdani International Pvt. Ltd. It was further submission that the AO further made an addition in respect of stock which was also found as per the seized documents with identification mark as YIPL-38. The AO estimated the value of the stock and treated the profit from the same as undisclosed income of the assessee. It was further submitted that proceeding further the AO found from the seized record identified as SCO-41 that the assessee has raised two bills to the tune of Rs.64,69,963/- on M/s Serajuddin & Co. Pvt. Ltd. on account of screening of iron ore and he made addition also. It was the submission that before the ld.CIT(A) the assessee filed an audit report u/s.44AB of the Act dated 20.03.2011. Before the CIT(A) it was submitted by the assessee that the stock did not belong to the assessee neither the exports. In respect of the screening income the assessee had shown a higher figure of nearly Rs.66,05,543/-. It was the submission that in the remand proceedings the Assistant Commissioner (Customs) had given a clarification that the exports did not belong to the assessee. It was also found that the stocks were related to M/s Serajuddin & Co. (P) Ltd. and Yazdani International (P) Ltd.. IT(SS)A Nos.23, 24 & 43/CTK/2013 4 Consequently, the ld. CIT(A) deleted the estimated profit determined on the two additions. 5. Coming to the issue of income from screening of iron ore, the assessee had claimed huge expenses of nearly Rs.54 lakhs on account of jobwork expenses and Rs.5,42,910/- as commission. It was the submission that consequently the ld. CIT(A) on the basis of the remand report accepted the net profit as disclosed in the audit report at Rs.14,55,280/- and disallowed the commission expenses of Rs.5,42,910/- on the ground that the commission did not appear to be reasonable. It was the submission that against the disallowance of the commission income the assessee is in appeal and against the allowance of expenses as claimed in the audit report, the revenue is in appeal. It was submitted by the ld. CIT-DR that this is a search case, undisclosed income has been found, no return has been filed, however, expenses have been claimed. These expenses, which have been allowed by the ld. CIT(A) are unverifiable and no verification has also been done by the AO. Consequently, in view of the provisions of Section 69A of the Act expenses are not allowable. It was also the submission that the Section 69C of the Act specifically provided for when the issue is not recorded in the books as maintained by him as well as u/s.69A of the Act the expenditure is not liable to be allowed more specifically under the provisio to Section 69C of the Act. It was the submission that the order of the ld. CIT(A) is liable to be modified to that extent. It was the submission that in IT(SS)A Nos.23, 24 & 43/CTK/2013 5 view of the decision of the Hon’ble Delhi High Court in the case of Kabul Chawla, reported in [2015] 61 taxmann.com 412 (Delhi), as the assessee has not filed its return of income, even the income as recorded in the books of account is liable to be treated as undisclosed income. 6. It was the submission that the income offered by the assessee in respect of screening income should be taken as Rs.66 lakhs as has been accepted by the ld. CIT(A) against which neither the assessee nor the revenue is in appeal and the expenditure will not be allowed. 7. In reply, ld.AR, at the outset, submitted that the assessee has incurred commission expenses for getting the job work in respect of screening of iron ore. The expenditure is liable to be allowed. It was further submission that the AO in the remand report has categorically admitted that reasonable expenditure is liable to be allowed. It is only after considering the expenditure claimed by the assessee in its profit and loss account to be a reasonable, the CIT(A) has taken a net profit as per the profit and loss account and had disallowed the commission expenses. It was the submission that Section 69A or 69C of the Act was not an issue which has been raised by the revenue in its appeal and, therefore, the same should not be considered. It was the submission that the revenue should not be permitted to raise the fresh issue which are not there in the assessment order nor considered by the lower authorities. It was the further submission that the books of accounts have not been provided to the assessee and the assessee had also filed Writ Petition before the IT(SS)A Nos.23, 24 & 43/CTK/2013 6 Hon’ble Jurisdictional High Court and the Hon’ble High Court had directed the revenue to provide the books of accounts but instead of providing the books the revenue had filed further appeal before the Hon’ble Supreme Court, wherein the appeal of the revenue has also been dismissed thereby upholding the decision of the Hon’ble Jurisdictional High Court. It was the submission that books have not yet been provided and the audit report has been prepared on the basis of the books available, collected and collated. It was submitted that the major expenses have been incurred only through banking channels. It was the submission that the assessee is entitled to the expenditure of the commission paid and appeal of the revenue is liable to be dismissed. 8. We have considered rival submissions. 9. At the outset, the submission of the ld.AR that the assessee has not received books of accounts, does not stand. The assessee has already challenged for non-providing books of accounts before the Hon’ble Jurisdictional High Court and the Hon’ble had directed the revenue to provide the books of accounts and this decision of the Hon’ble High Court has also been upheld by the Hon’ble Supreme Court. The assessee if it had not received the books would obviously have filed contempt before the Hon’ble High Court which the assessee had not done. Thus, obviously it should be presumed that the assessee has received the books. IT(SS)A Nos.23, 24 & 43/CTK/2013 7 10. Coming to the issue of additions, it is an admitted fact that the expenses as mentioned in the audit report has not been verified. The assessment order has been passed on 29.12.2010 and in less than three months assessee was able to obtain the audit report. What stopped the assessee to obtain the audit report before completion of assessment. No response is there. If what is stated by the assessee is true that the audit report was prepared from the books of accounts which were collected from the AO and collated on the basis of bank statements, the assessment order categorically specifies that the books were given as early as in March, 2010. Thus, clearly its expenses which have been claimed by the assessee in its audit report is unverified. Even in remand proceedings, these expenses have not been verified. The Audit report is a fresh evidence. The ld. CIT(A)has not specified why he is admitting the fresh evidence. True that the audit report has been provided to the AO for remand report but providing a remand report to the AO without the corresponding documents and statutory evidence, is an act in futility. 11. Coming to the issue of the provisions of Section 69C & 69A of the Act, clearly this is unexplained and undisclosed income of the assessee and the expenditure thereon and the source thereof have not been proved. Just because the AO in remand proceedings stated that reasonable expenses can be allowed does not mean that the provisions in respect of Section 69C & 69A of the Act can be unilaterally override. When a specific provision is available that provision will apply over IT(SS)A Nos.23, 24 & 43/CTK/2013 8 estimation. This being so, we are of the view that the order of the ld.CIT(A) suffers from serious irregularities. 12. It may specifically be mentioned here also that in respect of passing of remarks by the auditors in the audit report under Section 44AB of the Act, the Schedule 8 to the Audit report, notes to the account (2)(b) specifically mentions that the extracts of the books of accounts and other records which were kept in printed form were provided to the company in a delayed manner while the extracts of the electronic records which are yet to be provided by the Income Tax Authorities. What these extracts of the electronics records are, is not specified. In any case this does not support the case of non-cooperation, non-filing of returns and non- production of evidence of expenses claimed. This being so, the disallowance of commission expenditure by the CIT(A) is found to be correct and the same is hereby upheld. The allowance of other expenses in the profit and loss account is a violation of provisions of Section 69C and the proviso thereon and the order of the CIT(A) is reversed and the AO is directed to bring to tax the entire receipts from the screening of iron ore as the income of the assessee. In view of the foregoing discussions, both the appeals of the assessee are dismissed and appeal of the revenue is partly allowed. 13. In regard to the issue of suppression of sales and estimation of profit on the stock, as it is an admitted fact that the sales and the stock does not belong to the assessee and it is corroborated by the clarification IT(SS)A Nos.23, 24 & 43/CTK/2013 9 issued by the Assistant Commissioner (Customs) in the remand proceedings before the AO, we are of the view that the ld.CIT(A) has rightly deleted the said addition. 14. In the result, both appeals of the assessee for A.Y.2008-09 & 2009- 10 are dismissed and appeal of the revenue for A.Y.2008-2009 is partly allowed. Order dictated and pronounced in the open court on 07/07/2022. Sd/- (अरुण खोड़पऩया) (ARUN KHODPIA) Sd/- (जाजज माथन) (GEORGE MATHAN) ऱेखा सदस्य/ ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनाांक Dated 07/07/2022 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : आदेशाि ु सार/ BY ORDER, (Assistant Registrar) आयकर अपीऱीय अधिकरण, कटक/ITAT, Cuttack 1. अऩीऱाथी / The Appellant- 2. प्रत्यथी / The Respondent- 3. आयकर आय ु क्त(अऩीऱ) / The CIT(A), 4. आयकर आय ु क्त / CIT 5. पिभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, कटक / DR, ITAT, Cuttack 6. गार्ज पाईऱ / Guard file. सत्यापऩत प्रयत //True Copy//