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Income Tax Appellate Tribunal, “RANCHI BENCH, RANCHI
Before: Shri Sanjay Garg & Dr. Manish Borad
order : July 07, 2023 आदेश / ORDER संजय गग�, �या�यक सद�य �वारा / Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 16.12.2019 of the Commissioner of Income Tax, Appeal, Hazaribagh (hereinafter referred to as the ‘CIT(A)’) passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). 2. The assessee in this appeal has taken the following grounds of appeal: “1. For that assessment order dated 26.12.2018 passes u/s 143(3)/147 of the Income Tax Act for the AY 2011-12 is contrary to law and annexed the facts of the order.
2. For that assessment order dated 26.12.2018 passed u/s 143(3) of the Income Tax Act is wholly without jurisdiction, illegal, arbitrators & baseless.
Assessment year: 2011-12 Sanjay Kumar 3. For that the addition on the account of alleged payments on account of Agriculture Income of Rs. 14,74,159/- 4. For that the addition on the account of alleged so called income on account of Income from other sources of Rs. 22,37.992/- without referring any relevant section of IT Act.
Other grounds if any will be submitted at the time of hearing.”
Ground No.1 & 2 – Ground No.1 & 2 relates to the validity of the assessment framed u/s 143 r.w.s 147 of the Act. No arguments have been advanced by the ld. Counsel for the assessee in relation to these grounds. These Grounds are accordingly dismissed as not pressed.
Ground No.3 – Ground No.3 is relating to the addition made by the Assessing Officer on account of agricultural income.
5. At the outset, the ld. Counsel for the assessee has submitted that the aforesaid ground has been wrongly taken by the assessee. That the ld. CIT(A) has already granted relief to the assessee in relation to the claim of agricultural income and the impugned addition relating to this issue has been deleted.
In view of the above, no adjudication is required on this ground and this ground is accordingly dismissed having become infructuous.
Ground No.4 - Vide Ground No.4, the assessee has contested the addition of Rs.22,37,992/- on account of estimation of net profit @8% of the turnover.
The brief facts relating to the issue are that the assessee in his return has disclosed the net profit @13%. The business income included the receipts from consultancy charges, income from commodity trading and receipts from cutting charges. The Assessing Officer held that the aforesaid receipts from consultancy charges, income from commodity Assessment year: 2011-12 Sanjay Kumar trading and receipts from cutting charges cannot be included in the business income of the assessee for estimation of the profit over the turnover. The Assessing Officer treated the said receipts as other income of the assessee and estimated the net profit rate @8% on the remaining receipts/turnover of the assessee.
Before us, the ld. Counsel for the assessee has submitted that the aforesaid consultancy charges, income from commodity trading and receipts from cutting charges were part of the business of the assessee. That after considering the nature of the aforesaid receipts, the net profits were offered at a higher rate of 13%. That the Assessing Officer was not justified in excluding the said receipts from the turnover for the purpose of estimation of the profits.
The ld. DR, on the other hand, has relied upon the order of the lower authorities.
We have considered the rival submissions and gone through the record. The ld. CIT(A) has made the following observations on this issue:
5. Ground no 4 is against the re-computation of business income by estimation @8%. The AR pleaded that the AO computed the business income at Rs 49.95 lakhs by segregating and separately adding other income of Rs 22.37 lakhs to the business income estimate at 8 % of the turnover. He pleaded that no such segregation should have been made and further that the estimation @ 8% on the gross receipts is also incorrect. From the chart prepared by the assessee it is seen that the profitably disclosed has a wide fluctuation. The met profit for A.Y. 2009-10 after reducing the other income is at 3.56%. For A.Y. 2011-12 the same is at 6.60%. For A.Y. 2010-11, if the other income is excluded, then there is business loss. Thus the profitably as disclosed by the assessee cannot be taken as the yardstick. Under such circumstances, the estimation made the by AO at 8 % cannot be said to be incorrect. Similarly, the other income comprised of receipts from Consultancy charges, income from commodity trading and receipts from cutting charges", which are separate and independent of trading business. Thus the AO had rightly segregated such Assessment year: 2011-12 Sanjay Kumar incomes and separately added them for arriving at the overall business incomes. Ground no 4 of the assessee is dismissed.” A perusal of the above observation of the CIT(A) would reveal that the net profit for assessment year 2009-10 after reducing other income was at Rs.3,56% only. For assessment year 2011-12, the same would be at 6.60%. He further observed that for assessment year 2010-11, if the other income is excluded then there would be a business loss. However, the claim of the assessee is that the assessee has offered net profit @13% considering the nature of the aforesaid receipts of consultancy charges, income from commodity trading and receipts from cutting charges etc.
So far as the contention of the ld. Counsel for the assessee that the aforesaid consultancy charges, income from commodity trading and receipts from cutting charges should be treated as part of the business turnover of the assessee is concerned, we are not inclined to accept the same. The nature of the aforesaid receipts does not suggest a profit element of only 13% on such receipts, rather, the nature of above receipts would show that the same would field higher income. Therefore, we upheld the action of the Assessing Officer in segregating the aforesaid receipts from the remaining business income of the assessee. However, the income from the aforesaid receipts is required to be assessed after giving set off of the expenditure incurred to earn such income. The claim of the assessee in this respect is that in addition to the direct expenses incurred, there were indirect expenses in various heads e.g. salary and allowances/bank interest/insurance charges/depreciation/books & periodicals/postage & stamps etc. That certain expenditure is required to be allocated to the aforesaid receipts. Considering the above submissions, we estimate the expenses relating to the aforesaid receipts of Rs.22.37 lakhs at Rs.5 lakhs. The Assessing Assessment year: 2011-12 Sanjay Kumar Officer is directed to assess the income from the aforesaid segregated receipts after giving deduction of expenditure of Rs.5 lakhs.
12. So far as the estimation @8% of the remaining business income is concerned, as noted above, the same has been assessed at a higher rate. The ld. CIT(A) himself has noted that after segregating the aforesaid receipts, the net profit would be @ 3.56% for assessment year 2009-10 and it would be a loss for assessment year 2010-11 and it comes to 6.60% for assessment year 2011-12. Hence, considering the above data, the Assessing Officer is directed to assess the net profit @ 5% of the remaining business income.