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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI G. MANJUNATHA
आदेश /O R D E R
PER MAHAVIR SINGH, VICE PRESIDENT:
This appeal by the assessee is arising out of the order of the l Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in Appeal No.CIT(A), Madurai-2/10494/2019- 20 dated 25.08.2022. The assessment was framed by the Income Tax Officer, Ward-3, Nagercoil for the assessment year 2017-18 u/s.144 r.w.s. 147 of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide order dated 18.12.2019.
The fist issue in this appeal of assessee is as regards to the order of CIT(A) rejecting the ground challenging the assumption of jurisdiction for reopening of assessment u/s.147 r.w.s. 148 of the Act without assigning proper reasons and justifications.
At the outset, the ld.counsel for the assessee has not at all argued this ground and stated that the assessee has not pressed this ground and hence, the same is dismissed as not-pressed.
The next ground, on merits, is as regards to the order of CIT(A) sustaining the addition of Rs.1 crore as profit from business on the basis of sole statement recorded during the course of survey u/s.133A of the Act. For this assessee has raised ground Nos.6 to 11, which are exhaustive and argumentative and hence, need not be reproduced.
Brief facts are that the assessee is a firm dealing in manufacture and sale of fish nets and monofil at Melatharavillai,
Rajakamangalam Road, Erumbukadu PO, Kanyakumari. A survey u/s.133A of the Act was conducted in business premises of the assessee on 22.03.2018 from where the AO ascertained that during the financial year 2016-17 relevant to this assessment year 2017- 18 has effected total sales of fish nets amounting to Rs.3,19,39,287/- and sale of monofil amounting to Rs.1,65,43,771/- During the course of survey, the Department came to know that the assessee has not filed return of income for assessment year 2017- 18 and accordingly, Investigating officer asked the assessee about business transactions vis-a-vis sale arrived during the period FY 2016-17 and profit earned from the same. The assessee replied answer to question No.8, of the said statement recorded, during the course of survey, offered a sum of Rs.1 crore for taxation for assessment year 2017-18. The assessee neither filed its return of income nor paid the taxes. Accordingly, notice u/s.148 of the Act was issued. Consequently notice u/s.142(1) of the Act dated 03.09.2019 was issued and served on the assessee requiring the assessee to file certain details but neither return of income was filed nor any reply or details were filed. Thereafter again some notices were sent but no compliance. The AO noted from the facts available on record that during the course of survey it came to the notice of Department that total sale of fish nets and monofils worked out to be at 92,265.370 kgs, for which sale value arrived at Rs.3,19,39,287/-. This sale value was worked out on the basis of impounded worksheet for the period from March, 2016 to March, 2017 after reducing the sales representing for the month of March, 2016 i.e., 1,010.720 kgs. The AO worked out the total quantities sold at 91,254.65 kgs and the value is determined at Rs.3,15,05,280/- and worked out the selling rate at Rs.345.24 per kg. Similarly, the AO worked out the sale of monofils during financial year 2016-17 and the total quantity sold was valued at Rs.1,65,43,771/- for the quantity sold of 83,431.510 kgs. According to AO, thus the total sales effected during financial year 2016-17 relevant to this assessment year 2017-18 at Rs.4,80,49,051/-. The AO noted that the assessee has not maintained any books of accounts and hence he, on the basis of admission by the assessee during the course of survey made addition of Rs.1 crore and assessed the total income at Rs.1 crore. It is to be noted that the assessee has paid taxes u/s.140A at Rs.10 lakhs. This is noted by the AO in the assessment order. Aggrieved against assessing income at Rs.1 crore, only on the basis of sworn
CIT(A).
The assessee before CIT(A) pleaded that the determination of total income at Rs.1 crore on the turn over adopted by the AO at Rs.4,80,49,052/- is arbitrary and this give rise to profit rate of 25% which is very high in the business carried on by the assessee i.e., manufacture and sale of fish nets and monofils. According to assessee, the profit rate cannot be more than 1% in the given business. The CIT(A) has not considered the plea made by assessee and he noted that the AO had discovered the sufficient material to estimate the sales which was not challenged by assessee at Rs.4,80,49,052/-. Admitted the assessee has not filed any return of income nor maintained any books of accounts. Therefore, he confirmed the addition made by AO at Rs.1 crore. Aggrieved, assessee came in appeal before the Tribunal.
We have heard rival contentions and gone through facts and circumstances of the case. Admittedly, there is no book of accounts and assessee has not filed return of income. Further, Revenue has impounded certain material during the course of survey i.e., sheet
No.1 & 2 which reflects the sales of fish nets for the period from March, 2016 to March, 2017 and also the sale of monofils. The AO after taking into consideration the quantity and value worked out the total sale effected during this financial year 2016-17 at Rs.4,80,49,052/-, which is not challenged by assessee. The ld. Senior DR relied on the assessment order and the order of CIT(A) and stated that the assessee has no case for allowing any relief and AO has rightly added the sum of Rs.1 crore because assessee could not substantiate its case and moreover no return of income was filed by assessee and no books of accounts are maintained. The ld.counsel for the assessee however requested for estimation of profit rate that he offered only 4 to 5%.
7.1 After hearing both the sides and going through the facts of the case, we noted that making addition of Rs.1 crore of undisclosed income solely on the basis of statement of the assessee will give distorted profit rate. Admittedly, the Revenue could lay their hand on total sales of fish nets and monofils which work out to Rs.4,80,49,051/- which is unchallenged. Now only way out is to estimate the profit and a reasonable profit rate can be applied on the above sale and that will be the profit of the assessee. The assessee is in manufacturing and trading of fish nets and monofils which is specialized item and hence give a little higher profit rate. Accordingly, we estimate the profit rate at 10% and direct the AO to compute the profit on the total sales of Rs.4,80,49,052/- and assess the income accordingly.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 17th May, 2023 at Chennai.