Saurabh Agrawal , Indore V. Assistant Commissioner Of Income Tax (Central)-II, Indore

ITSSA 303/Ind/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8332 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 09-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-06-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 13-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Assessee Lawyers: ANIL K KHANDELWAL
• Keywords: Search and seizure; Revised return
• Section: 153A; 205; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.702/IND/2017 ASSESSMENT YEAR: 2014-15 SAURABH AGRAWAL 531, SUDAMA NAGAR, SHIV MANDIR CHOWK, INDORE / VS. ACIT, CENTRAL-1 INDORE ( APPELLANT ) (RE VENUE) PAN: AGTPG6488P IT(SS)A NO.303/IND/2017 ASSESSMENT YEAR: 2013-14 SAURABH AGRAWAL 531, SUDAMA NAGAR, SHIV MANDIR CHOWK, INDORE / VS. ACIT, CENTRAL-1 INDORE ( APPELLANT ) ( RE VENUE ) PAN: AGTPG6488P APPELLANT BY SHRI ANIL K. KHANDELWAL, CA RE VENUE BY SMT. ASHIMA GUPTA CIT - DR DATE OF HEARING: 24.06.2019 DATE OF PRONOUNCEMENT: 09.07.2019 / O R D E R SAURABH AGRAWAL ITANO.702/IND/2017 & IT(SS) ANO.303/IND/2017 2 PER MANISH BORAD, A.M: THESE TWO APPEALS AT THE INSTANCE OF ASSESSEE PERTA INING TO A.YS. 2013-14 & 2014-15 ARE DIRECTED AGAINST THE OR DER OF LD. COMMISSIONER OF INCOME TAX(APPEALS)-III, INDORE, (I N SHORT CIT(A)), DATED 31.08.2017 WHICH ARE ARISING OUT OF THE ORDER U/S 153A OF THE INCOME TAX ACT 1961(HEREINAFTER CALLED AS THE ACT ) FRAMED ON 30.03.2016 BY ACIT-(CENTRAL)-1, INDORE. 2. THE ASSESSEE HAS RAISED FOLLOWING COMMON GROUNDS OF APPEAL IN ITANO.702/IND/2017 & IT(SS)A NO.303/IND/2017: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(A) ERRED IS NOT ACCEPTING THE INCOME OFFE RED BY THE APPELLANT BY ALLOWING EXPENSES @20% INSTEAD OF CLAIMED @40% OF GROSS RECEIPTS. 2.APPELLANT RESERVES RIGHT TO ADD, ALTER OR AMEND ANY OF THE GROUNDS OF APPEAL. 3. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS AND RELEVANT TO THE ISSUE RAISED BEFORE US ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF AN RTO AGENT SINCE LAST MANY YEARS. SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT WER E CARRIED OUT AT THE PREMISES OF THE ASSESSEE ALONG WITH BUSINESS AN D RESIDENTIAL PREMISES OF THE LCH GROUP OF INDORE ON 04.10.2013. NOTICES U/S 153A OF THE ACT WERE SERVED UPON THE ASSESSEE FOR A .YS. 2008-09 TO 2013-14 AND U/S 143(2) OF THE ACT FOR A.Y. 2014-15. IN RESPONSE THERETO THE ASSESSEE FILED RETURN OF INCOME. THE IN STANT APPEAL RELATES TO THE ISSUE OF DISALLOWANCE OF EXPENSES CL AIMED BY THE ASSESSEE AGAINST THE INCOME EARNED FROM COMMISSION. IN THE INCOME TAX RETURN FILED FOR A.YS.2013-14 & A.Y.2014 -15 ASSESSEE DECLARED GROSS RECEIPTS AT RS.16,50,000/- AND RS.10 ,80,000/- AND SAURABH AGRAWAL ITANO.702/IND/2017 & IT(SS) ANO.303/IND/2017 3 CLAIMED EXPENSES @40% TOWARDS SALARY, CONVEYANCE, C OMMISSION, MOBILE, STATIONERY EXPENSES. LEARNED ASSESSING OFFI CER (IN SHORT LD. AO) HOWEVER WAS NOT CONVINCED WITH THIS CLAIM AS W ELL AS WITH THE DECREASED GROSS RECEIPTS AND ASSESSED THE INCOME TR EATING THE GROSS RECEIPTS OF RS.16,50,000/- AS INCOME FROM COMMISSIO N FOR A.YS. 2013-14 & 2014-15 WITHOUT ALLOWING ANY EXPENDITURE. INCOME FOR A.YS. 2013-14 & 2014-15 ASSESSED AT RS.18,42,830/- & RS.18,65,250/-. 4. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE TH E LD. CIT(A) BUT PARTLY SUCCEEDED, AS LD. CIT(A) GAVE SOME RELIEF ON ACCOUNT OF GROSS RECEIPTS AND ALSO ALLOWED THE EXPENSES TO THE TUNE OF RS. 20% OF THE GROSS RECEIPTS. 5. NOW, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUN AL. 6. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN T HE LINE OF BUSINESS IN WHICH THE ASSESSEE IS ENGAGED INTO INCU RRING OF EXPENSES TOWARDS SALARY, CONVEYANCE, COMMISSION, MO BILE, STATIONERY EXPENSES AS WELL AS COMMISSION PAID FOR PROCURING THE BUSINESS IS NORMAL AND ASSESSEE HAS CONSERVATIVELY CLAIMED 40% OF THE EXPENSES WHICH SHOULD HAVE BEEN ALLOWED. 7. PER CONTRA LEARNED DEPARTMENTAL REPRESENTATIVE ( LD. DR) VEHEMENTLY ARGUED AND SUPPORTING THE ORDERS OF THE LOWER AUTHORITIES. 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. THE COMMON ISSUE RAISED FOR A.YS.2013-14 & 2014-15 RELATED TO ALLOWABILITY OF EXPENSES AGAINST COMMISS ION INCOME OFFERED BY THE ASSESSEE. EXPENSES @40% OF GROSS REC EIPTS CLAIMED SAURABH AGRAWAL ITANO.702/IND/2017 & IT(SS) ANO.303/IND/2017 4 BY THE ASSESSEE BUT LD. CIT(A) SUSTAINED IT TO 20% OF THE GROSS RECEIPTS. 9. WE OBSERVE THAT THE LD. CIT(A) ALLOWED 20% OF GR OSS RECEIPTS AS EXPENSES FOR A.YS. 2013-14 & 2014-15 GIVING FOLLOWI NG FINDING. GROUND NO.6 AND ADDITIONAL GROUND THESE GROUNDS ARE REGARDING THE ADDITION OF RS.16,50 ,000/- MADE ON ACCOUNT OF COMMISSION INCOME. THE APPELLANT HAS REL IED ON THE DETAILED SUBMISSIONS MADE FOR A.Y. 2008-09. THIS ISSU E HAS BEEN DEALT WITH IN DETAIL IN THE APPELLANTS APPEAL NO.IT -14/16-17 FOR A.Y.2008-09. VIDE THE APPEAL ORDER DATED 31/08/2017 FOR A.Y. 2008-09 IT HAS BEEN HELD AS UNDER: 5.3 DURING THE SEARCH INCRIMINATING NOTE LPS-1/6 TO LPS-1/13 WERE SEIZED WHICH CONTAINED TUBULAR HAND WRITTEN ENTRIES FO R THE PERIOD 12.12.2012 TO 16.08.2013. THE APPELLANT ADMITTED THA T THESE ENTRIES HAVE BEEN WRITTEN BY HIM AND CONTAIN DETAILS OF RTO R ELATED WORK ON DAILY BASIS. DURING THE ASSESSMENT PROCEEDINGS THE APPELLANT UNDER OATH DECODED THE ENTRIES IN THE SAID NOTE BOOKS. ON THE BASIS OF THE ENTRIES IN THE ABOVE MENTIONED S EIZED DIARIES THE GROSS INCOME WAS CALCULATED BY THE APPELLANT DURING T HE COURSE OF ASSESSMENT PROCEEDINGS FOR THE PERIOD 12.1.22012 TO 16.08.2013 AS UNDER: LPS NO. PERIOD AS AMOUNT MS AMOUNT LPS11 12.12.2012 TO 10.01.2013 107595 102340 LPS12 15.01.2013 TO 10.02.2013 78820 66300 LPS 7 1 4 .0 2 .2013 TO 1 3 .0 3 .2013 90520 118800 LPS 8 15.0 3 .2013 TO 10.0 4 .2013 102575 37100 LPS 9 15.0 4 .2013 TO 10.0 5 .2013 75050 66970 LPS 10 1 7 .0 5 .2013 TO 1 4 .0 6 .2013 107320 69150 LPS 6 1 7 .0 6 .2013 TO 1 7 .0 7 .2013 59495 46700 LPS 3 1 8 .0 7 .2013 TO 1 6 .0 8 .2013 53 465 40945 674840 548305 5.5 THE GROSS INCOME CALCULATED FOR THE PERIOD 12.12. 2012 TO 16.08.2013 I.E. FOR 8 MONTH IS RS.12,23,145/-. IN T HE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHY THE INCOME SHOULD NOT BE ESTIMATED AT AVERAGE OF RS.1,52 ,893/- PER SAURABH AGRAWAL ITANO.702/IND/2017 & IT(SS) ANO.303/IND/2017 5 MONTH ON PRO-RATA BASIS AND SIMILARLY ESTIMATED FO R A.YS. 2008-09 TO 2014-15. THE APPELLANT SUBMITTED THAT DEDUCTION OF 40% OF THE GROSS RECEIPTS SHOULD BE ALLOWED FOR THE EXPENDITURE INCURRED ON THE SALARIES OF 3 ASSISTANTS, PETROL AND CONVEYANCE, COM MISSION MOBILE, STATIONERY AND PHOTOCOPY EXPENSES. THE APPELLANT SUB MITTED THAT DURING THE PERIOD 12.12.2-2012 TO 16.08.2013 THE VOLU ME OF WORK HAD INCREASED SUBSTANTIALLY BECAUSE HE STARTED WORKING ON THIN MARGINS. CONSIDERING A CONSISTENT GRADUAL GROWTH IN THE BUSINESS THE APPELLANT ESTIMATED HIS INCOME AND OFFERED THE REV ISED INCOME IN THE ASSESSMENT PROCEEDINGS AS UNDER- A.Y. INCOME SHOWN U/S 153A REVISED INCOME OFFERED IN ASSESSMENT PROCEEDINGS ESTIMATED BY AO 2008 - 09 1,06,260 3,00,000 4,06,260 2009 - 10 1,39,370 3,60,000 4,99,370 2010 - 11 1,34,950 4,20,000 5,54,950 2011 - 12 1,59,980 4,80,000 6,39,980 2012 - 13 1,78 ,460 5,40,000 7,18,460 2013 - 14 1,92,830 9,90,000 18,42,380 2014 - 15 2,15,250 6,48,000 18,65,250 5.6 HOWEVER, NO REVISED RETURNS WERE FILED IN THIS RE GARD. THE ASSESSING OFFICER ACCEPTED THE ESTIMATED THE INCOME A S GIVEN ABOVE BY THE APPELLANT. THE ONLY DIFFERENCE BETWEEN THE I NCOME ESTIMATED BY THE ASSESSING OFFICER FOR A.YS. 2008-09 TO 2012- 13 AND THAT OFFERED BY THE APPELLANT IS THAT THE ASSESSING OFFIC ER HAS MADE THE ESTIMATION OF THE COMMISSION INCOME OVER AND ABOVE T HE INCOME OFFERED BY THE APPELLANT IN THE RETURN FILED U/S 153A . AS NO DETAILS OF THE EARLIER PERIOD ARE AVAILABLE THE APPELLANT MADE ON AD HOC OFFER FOR THE EARLIER YEARS. THE ASSESSING OFFICER HAS ST ATED IN THE ORDER THAT THE ESTIMATION IS BEING DONE ON THE BASIS OF T HE QUANTUM OF INVESTMENT MADE IN THE PROPERTIES AND CASH DEPOSITS IN BANK ACCOUNTS. AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT THE ESTIMATION OF INCOME HAS BEEN COR RECTLY DONE ON PRO-RATA BASIS ON THE ENTRIES FOUND FOR PERIOD 12.12 .2012 TO 16.08.2013. TAKING THE AVERAGE OF RS.1,52,893/- PM, THE GROSS INCOME FOR A.Y. 2012-13 CAN BE ESTIMATED AT RS.18,3 4,718/-. HOWEVER, I DO NOT SEE ANY JUSTIFICATION IN THE APPE LLANTS CLAIM OF 40% AS EXPENSES ESPECIALLY AS IT IS SHOWING SUBSTAN TIAL EXPENDITURE ON COMMISSION FOR WHICH THERE IS NO EVIDENCE PLACED ON RECORD. CONSIDERING FROM THE SEIZED DIARIES, IT IS LOGICAL TO ACCEPT THAT ASSISTANTS WOULD BE REQUIRED AND EXPENDITURE INCURRED O N PHONE SAURABH AGRAWAL ITANO.702/IND/2017 & IT(SS) ANO.303/IND/2017 6 CALLS, PHOTOCOPY AND CONVEYANCE TEC. THUS, I AM OF T HE VIEW THAT 20% IS A FAIRE ESTIMATED OF THE EXPENSES WHICH MORE THAN COVERS THE SALARIES PETROL AND CONVEYANCE, MOBILE STATIONARY PH OTOCOPY EXPENSES ESTIMATED BY THE APPELLANT HIMSELF DURING TH E ASSESSMENT PROCEEDINGS. THE INCOME FOR A.Y. 2013-14 ON ACCOUNT OF COMMISSION IS THEREFORE WORKED OUT TO RS.14,67,774/- AFTER ALLO WING 205 EXPENSES FROM THE GROSS INCOME ESTIMATED AT RS.18,34 ,718/-. 4.1 THE SEIZED DIARIES ARE FOR THE PERIOD 12.12.2012 TO 16.08.2013 AND AS DISCUSSED ABOVE THE AVERAGE GROSS INCOME PER MONTH IS TAKEN AT RS.1,52,893/-. THE SEARCH WAS CONDUCTED ON 0 4.10.2013 AND THE APPELLANT HAS SUBMITTED THAT AFTER THE SEARC H THERE NO BUSINESS AND IT WOULD BE UNJUST TO ESTIMATE THE MONTH LY AVERAGE GROSS INCOME FOR THE POST SEARCH PERIOD AT THE SAME ETC. THE SUBMISSIONS MADE IN THIS REGARD AS UNDER: IN CONNECTION WITH THE ABOVE CASE IN RESPECT OF TH E A.Y. 2014- 15, WE RESPECTFULLY SUBMIT BEFORE YOUR HONOR THAT A PPELLANTS PREMISES WERE SEARCH ON 4-5 OCT, 2013 AND THEREAFTE R HIS BUSINESS VIRTUALLY COME TO HALT BECAUSE APPELLANT COULD NOT P AY ATTENTION TO EH BUSINESS IN VIEW OF ATTENDING VARIOUS DATES, NOTICE S AND PREPARING RELEVANT INFORMATION SOUGHT BY THE DEPARTMENT BESIDES MENTAL STRESS. THE SAME STATUS MAINTAINED FOR REMAINING PAR T OF THE F.Y. 2013-14 I.E. A.Y.2014-15. CONSIDERING THESE FACTORS IT IS SUBMITTED THAT HE DID NOT EARN ANY INCOME FOR SIX MONTHS IN A. Y. 2014-15 AND NO INCOME BE ESTIMATED FOR THE SAME. 4.2 IT IS REASONABLE TO ACCEPT THAT AFTER THE SEARC H WAS CONDUCTED, THE BUSINESS OF THE APPELLANT AT RTO AGENT WOULD BE AFFECTED ADVERSELY FOR A FEW MONTHS. THEREFORE, THE MONTHLY GROSS INCOME FROM 01.04.2013 TO 30.09.2013 FOR 6 MONTHS IS TAKEN AT RS.1,52,893/- WHICH AMOUNTS TO TOTAL OF RS.9,17,358 /-. FOR THE BALANCE 6 MONTHS I.E. THE POST SEARCH PERIOD, THE A PPELLANTS CONTENTION THAT THERE WAS NO BUSINESS CONDUCTED IS NO T ACCEPTABLE AND IT WOULD BE REASONABLE TO TAKE THE GROSS INCOME A T 50% WHICH AMOUNTS TO RS.4,58,679/-. THUS, THE GROSS INCOME FO R A.Y. 2014-15 AMOUNTS TO RS.13,76,037/- AND CONSIDERING 20% AS EXP ENSES AS DISCUSSED IN THE APPELLATE ORDER FOR A.Y. 2008-09 THE NET INCOME FOR A.Y.2014-15 IS WORKED OUT TO RS.11,00,830/-. IN VIEW OF THE ABOVE, GROUND NO.6 AND ADDITIONAL GROU ND ARE PARTLY ALLOWED. SAURABH AGRAWAL ITANO.702/IND/2017 & IT(SS) ANO.303/IND/2017 7 10. WE OBSERVE THAT FOR PROPER RUNNING OF RTO AGENT BUSINESS, ASSESSEE IS REQUIRED TO INCUR EXPENDITURE O F PHONE CALLS, PHOTOCOPY, CONVEYANCE ETC. IT IS ALSO OBS ERVED THAT THE SEIZED NOTE BOOK LPS-1/6 TO LPS-1/13 CONTAIN ED REGULAR HAND WRITTEN ENTRIES FOR THE PERIOD 12.12.201 2 TO 16.08.2013 ABOUT VARIOUS AMOUNTS RECEIVED BY THE ASSESSEE AS COMMISSION AND IT ALSO CONTAINED DETAILS OF CASH PAYMENT MADE FOR INCURRING VARIOUS EXPENSES. A ROUGH ACCOUNT WAS MAINTAINED FOR INFLOW AND OUTFLOW OF CASH. THE ASSESSEE MADE ROUGH ESTIMATE OF EXPENSES AT 40% OF GROSS RECEIPTS WHICH LD. CIT(A) HAS CONFIRMED TO 20% OF GROSS RECEIPTS. 11. WE, HOWEVER, BEING FAIR TO BOTH THE PARTIES AND LO OKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS NAT URE OF BUSINESS CARRIED OUT BY THE BUSINESS FIND THAT 30% OF THE GROSS RECEIPTS WILL BE A FAIR ESTIMATE OF THE EXP ENSES WHICH THE ASSESSEE MAY HAVE INCURRED TOWARDS VARIOUS EXPENSES OF SALARY, COMMISSION, CONVEYANCE, TELEPHONE, STATIONARY ETC., SO AS TO EARN THE COMMISSION INCOME AS AN RTO AGENT. WE, ACCORDINGLY, DIRECT THE REVENUE AUTHORI TIES TO ALLOW THE CLAIM OF EXPENSES @ 30% AGAINST THE GROSS RECEIPTS CONFIRMED BY THE LD. CIT(A) IN ITS APPELLATE ORDER FOR A.YS. 2013-14 & 2014-15 RESPECTIVELY. SAURABH AGRAWAL ITANO.702/IND/2017 & IT(SS) ANO.303/IND/2017 8 12. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE AR E PARTLY ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 09 .07. 2019. SD/- (KUL BHARAT) SD/- (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER INDORE; DATED : 09/07/2019 CTX? P.S/. . . COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER ASSISTANT REGISTRAR