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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
आयकर अपील�य अ�धकरण, इ�दौर �यायपीठ, इ�दौर
IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE
BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER Heard Through Virtual Hearing
ITA No.612/Ind/2019 Assessment Year:2010-11
Shri Ganesh Agrawal Pr.CIT-I, Ujjain Ujjain बनाम/ (Appellant) (Revenue ) Vs. P.A. No.AJLPA0509L Appellant by Shri S.S. Deshpande, AR Revenue by Shri S.S. Mantri, CIT-DR Date of Hearing: 15.12.2020 Date of Pronouncement: 12.01.2021 आदेश / O R D E R PER KUL BHARAT, J.M: This appeal by the assessee is directed against the order of ld. Pr. Commissioner of Income Tax (in short ‘Ld. Pr. CIT)-I, Ujjain, dated 28.03.2019 pertaining to assessment year 2010-11. The assessee has raised following grounds of appeal: “1. The order passed by the Ld. CIT is illegal and bad in law and hence be set aside. 2. The ld. Pr. CIT has erred in passing the order u/s 263 on the
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ground that the order passed by the Ld. AO is erroneous and prejudicial to the interest of the revenue. 3. It was proved before the Ld. Pr. CIT that the assessment was framed after due scrutiny of facts and after verification of the details for which the Ld. pr. CIT has observed that the AO has erred in applying the Net Profit ratio of 3% on the amount of Rs.1,29,98,456/-. Since scrutiny was made by the Ld. AO the same cannot be treated as erroneous and prejudicial and as such action u/s 263 is bad in law. 4. The order passed by the Ld. Pr. CIT be quashed.”
The effective ground is against invoking the provision of section 263 of the Act, thereby, revising the assessment order.
The facts giving rise to the present appeal are that the case of the assessee was reopened and the assessment was completed on 28.11.2016, assessing income at Rs. 9,89,825/-. Subsequently, the Ld. Pr. CIT after examining the records invoked the provision of section 263 of the Act, on the ground that assessee had received only Rs. 1,97,73,072/- as per the form No.16A. The assessing officer was factually incorrect to accept balance receipts of Rs.1,29,98,456/- being transport contract receipts and applying 3% N.P. on entire receipt of Rs.3,27,71,528/-. In response to the notice issued u/s 263 of the Act, the assessee filed its explanation which was not found to be acceptable. Ld. Pr. CIT set aside the assessment order and directed the assessing officer to examine the issue afresh.
Aggrieved against this the assessee is in appeal before this Tribunal. Ld. counsel for the assessee reiterated the submissions as made in the written submissions. Ld. counsel submitted that in this 2
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case assessment u/s 143(3) r.w.s 147 of the Act was reopened, thereby, the income was assessed at Rs. 9,89,825/-. He contended that the assessing officer has made all the enquiries, further he reiterated the submission as made in the written synopsis. The submissions of the assessee are reproduced as under: “The assesse is an individual deriving income from commission of transport business. The assessee does not own my trucks. No books have been maintained and the income is shown on an estimated basis. The return of income was filed estimating the income @ 3% of the total receipts at Rs.1,97,73,072/- thereby declaring the income of Rs.5,93,192/-. 2. Subsequently, the notice u/s 147 was issued on the ground that the profit shown is not reliable and as per the information the net profit should be Rs.15,18,846/-. In response to notice u/s 147 it was submitted that the return filed earlier may be treated as a return filed in response to notice u/s 147. However, the revised income was declared showing the receipt of Rs.3,27,71,528/- and declaring the income @ 3% which came to Rs.9,83,145/-. 3. During the course of the assessment proceedings, the Ld. AO asked the assessee to file the necessary details and explanation in respect of the revised income declared. Various queries were raised and the necessary explanation was offered. The ld. AO while framing the assessment scrutinized the bank statement and verified the total receipts of the assessee at Rs.3,27,71,528/-. After considering all the submissions and the details filed the Ld. AO accepted the revised income declared at Rs.989,825/-. In para 1 the Ld. AO observed as under: The assessee has offered net profit of Rs.5,93,192/- on gross receipts of Rs.19737072/- at the rate of 2.99% on total turnover. The assessee has also submitted that he has not maintained books of account and thus, he has not prepared P/L account, capital account and balance sheet, therefore he is not able to produce the same. Verification of bank statement submitted by the assessee total turnover was found at Rs.32771528/- considering the above facts and circumstances, net profit of Rs.983145/- at the rate of 3% is applied on total receipts of Rs.32771528/-. As the assessee has already declared the net profit of Rs.593192/-, therefore, difference of net profit an amount of Rs.389953/- is added to the total income of the assessee.” 3
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Subsequently, the Ld. Pr. CIT issued a noticed to invoke the provision u/s 263 with the reasons that the receipt from the contract is only Rs.1,97,73,072/- while the bank account shows the deposit of Rs.3,27,71,528/- which means the balance was the income from other sources and the profit @3% cannot be applied. On this basis the Ld. Pr. CIT directed to the AO to examine this issue in detail in order to ascertain the true state of facts u/s 143(3) has been held to be erroneous and prejudicial to the interest of the revenue. 5. Before the Ld. PCIT a detailed submission was made and it was submitted that the assessee has applied the net profit rate of 3% on the total receipt from the contract business which was properly examined by the Ld. A.O. After considering all these details the Ld. A.O. has accepted the revised computation of the assessee. Thus, the order cannot be said to be erroneous and it is a mere change of opinion and as such provisions of section 263 are not applicable. 6. The Ld. PCIT in para 4.2 remarked that the A.O. is required to examine the deposits in the bank and ascertain true state of facts. He therefore, set aside the assessment order, being erroneous and prejudicial to the interest of the revenue. 7. It is humbly submitted that since the assessment has been framed after due verification of the facts and material on record, the action u/s. 263 is bad in law. The assessee filed complete explanation and details of the bank account. There is no other business of the assessee except the transport commission. The details of the amount transferred in the bank account with the names and the withdrawals were submitted. It would be seen from these details that most of the amounts credited were through clearing which represented the transport receipts. After considering all the details the Ld. A.O. accepted the explanation of the assessee about the commission receipt of the transport business on the amounts credited in the bank. This finds support with the judgement of CIT vs. Anil Kumar Jain reported in 23lTJ 268 (MP) wherein it has been held that the credits in the bank represents the sale proceeds and only the profit on them can be taxed. Under these circumstances, the order cannot be said to be erroneous. It is humbly submitted that the assessment order is neither erroneous nor is prejudicial to the interest of the revenue and as such the action uls 263 is bad in law. 8.In this connection we would like to draw your honours kind attention to the various High Court judgments which are as under:- CIT Vis. Govindram Sakseria Trust 166 ITR p.580 (MP) CIT Vis. Ratlam Coal Ash Co. 171 ITR p.141 (MP) CIT Vis. A.K. Timber 177 ITRp.486 (Punjab) CIT Vis. Gabriel (India) Ltd. 203 ITR p.108 (Born.) The various Tribunals have also taken the same view in 57 TTJ p.257, 4
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65 lTD p.1. The Indore Tribunal has also followed these judgments in many cases. Coming to the various case laws, we would like to draw your honour's kind attention to the judgments as under:- a.CIT V/s. Ratlam Coal Ash Co. 171 ITR p.141 (M.P.):- An order of assessment was revised by the Commissioner u/s. 263, on the ground that the income tax officer had not made proper enquiries. The order of revision was set-aside by the Tribunal because it was found that the assessee had furnished requisite information and the income tax officer had completed the assessment after considering all facts. Held, that the Tribunal was justified in Law reversing the order of the Commissioner u/s. 263. b. CIT V/s. A.K. Timber 177 ITR p.486 (Punjab):- The Income Tax Officer completed assessment u/s.144 and granted registration to the firm. The CIT held that the ITO should have cancelled the registration and failure on his part to do so, constituted an error u/s.263. Held, if the assessee firm can satisfy the revenue that there was no willful default, the benefit of continuation of registration may not be denied. In the instant case, the Tribunal was right in law in holding that there was no error in the order of the income tax officer and therefore the commissioner had no jurisdiction uls.263 in respect thereof. c: CIT V/s. Gabriel (India) Ltd. 203 ITR p.108 (Bom.):- Held, that the income tax officer had made enquiries in regard to the nature of the expenditure incurred by the assessee, the assessee had given a detailed explanation in that regard by a letter in writing, evidently the claim was allowed by the ITO on being satisfied with the explanation of the assessee. The decision of the income tax officer could not be held to be erroneous simply because in his order he did not made an elaborate discussion. The Tribunal was justified in setting aside the order passed by the CIT uls.263. In view of the above, it is submitted that the action u/s. 263 is bad in law and as such the same may kindly be quashed.
Ld. Pr. CIT-DR opposed these submissions and submitted that the assessing officer did not make any enquiry in respect of the profit margin related to other deposits found in the bank account of the assessee. He submitted that the assessing officer casually
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accepted in a mechanical manner without conducting enquiry about the receipts which were not related to Form No.16A. Hence, the assessment so framed is erroneous and prejudicial to the interest of revenue.
In rejoinder Ld. counsel for the assessee pointed out that the reason for reopening to the assessment and revising the assessment are same. He further contended that the reassessment proceedings had made detailed enquiry, therefore, the assessment so framed cannot be held to be erroneous and prejudicial to the interest of revenue. He drew our attention to the reply made to the assessing officer. He submitted that before the assessing officer it was categorically stated that the assessee had received amount of Rs.3,27,71,528/- against the transport work, the details which was enclosed before assessing officer. He has also taken us through the bank account statement enclosed with paper book.
We have heard rival submissions and perused the material available on record. We find that Ld. Pr. CIT issued show cause notice dated 25.03.2019. The relevant contents of the notice recorded in the impugned order are reproduced as under: “In this case the return of income was submitted by the assessee for A.Y.2011-12 on 09.01.2012 showing total income of Rs.5,99,870/-. The assessee is a transport contractor. The case was opened for scrutiny u/s 147 of the Act and accordingly the assessment u/s 143(3)/147 was completed on 28.11.2016 at an assessed income of Rs.9,89,825/- by applying 3& N.P. on total receipt of Rs.3,27,71,528/- by transport contract, which is considered erroneous and prejudicial to the interest of revenue for the following reasons:
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The assessee had received only 1,97,73,072/- as per form No.16A, however credit in bank showed it at 3,27,71,528/- itselt. Thus basically the assessee had not clarified about such balance income i.e. 3,27,71,528-19773072= 1,29,98,456/- not incorporated in form no.16A. the assessee vide his reply dated 25.11.2016 had clearly mentioned that he had got Govt. contracts only. Thus there was no evidence that such Rs.1,29,98,456/- was generated from transport contract only or by some other business/source. In fact the AO had applied 3% NET PROFIT over this amount of Rs.1,29,98,456/- also along with Rs.1,97,73,072/- of transport contract receipt whereas the concealed income of Rs.1,29,98,456/- was generated by which source was not clear and does not fall under transport contract as claimed. The AO was factually incurred to accept balance receipts of Rs.1,29,98,456/- being transport contract receipts and applying 3% NET PROFIT on entire receipt of Rs.3,27,71,528/-. 2. However the assessee being Govt. Contractor had received only Rs.1,97,73,072/- from Govt. Department and the bank a/c showed deposits of Rs.3,27,71,528/- which means balance Rs.1,29,98,456/- was income from other source only over which 3% profit cannot be applied on such receipt which was income from other source for which no income/expenditure a/c & vouchers were maintained by the assessee and as such entire receipt of Rs.1,29,98,456/- was liable for addition in absence of any explanation u/s 68 of the IT Act offered by the assessee. 3. In the light of entire facts discussed above, I am of the considered view that the assessment order passed u/s 143(3) on 28.11.2016 for A.Y. 2010-11 in your case if erroneous as well as prejudicial to the interest of revenue, which requires to be revised u/s 263. However, before I proceed to invoke the powers u/s 263 and pass an appreciate order, I deem it proper to give you an opportunity of being hear in the matter.
Further, we find that in this case notice u/s 147 of the Act was
issued wherein it has been specifically asked to explain turnover and
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profit thereon. The reasons for reopening as enclosed in the paper
book at page no.20 states as under:
(l) The assessee is engaged 'in transport activity under the title of his proprietorship firm namely "M/s. Shree Ganesh Road Lines" .. On perusal of return of Income of the assessee for the assessment year 2010-11) it is noticed that the turnover was at Rs. 1,97,37,072/-. The assessee has not got his books of account audited. As such the assessee has violated the provisions of section 44AD. (2) On perusal of computation of income it is noticed that the assessee has shown net profit of Rs.5,93,192/- which is 2.99 percent of the turnover. The estimation of profit is not reliable .as the accounts were not audited. Further) the office is in possession of information that the net profit during the year under consideration was at Rs.15,81,846/- (3) In the view of these facts, I am satisfied and have reason to believe that 'income of Rs.9,88,624/- has escaped assessment as per the meaning provided to these words in section 147 of Income Tax Act., limitation of which will expires on 31/03/2017.
Further, it is seen that there is a correspondence between the assessing officer and the assessee regarding the aforesaid issue. Under these undisputed facts, it cannot be construed that the assessing officer has not made any enquiry. Looking to the nature of business and more particularly no material brought on record on behalf of the revenue to demonstrate that the bank deposits were not related to the transport business and the profit rate adopted by the assessing officer was not correct. Under these fact, we are of the considered view that the Ld. Pr. CIT was not justified in invoking the provisions of section 263 of the Act. Hence, we hereby, quash the impugned order. Grounds raised in this appeal are allowed.
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In result, appeal filed by the assessee is allowed. Order was pronounced in the open court on 12.01.2021.
Sd/- Sd/- (MANISH BORAD) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER Indore; �दनांक Dated : 12/01/2021 Patel/PS Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order
Assistant Registrar, Indore