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Income Tax Appellate Tribunal, “B” BENCH KOLKATA
Before: Shri Sanjay Garg & Shri Girish Agrawal
order : October 18, 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 30.04.2019 of the Commissioner of Income Tax (Appeals)-8, Kolkata [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’).
As per the record of the registry, the appeal is time-barred by 766 days. A separate application for condonation of delay has been filed, wherein, it has been submitted by the ld. counsel for the assessee that the period of delay was marred by the Covid-19 pandemic. In view of this, the delay in filing the present appeal is hereby condoned. Assessment Year: 2015-16 Mukhtar Ahmed 3. The assessee in this appeal has taken the following grounds of appeal:
“1. That on the facts and in the circumstances of the case the action of the Ld. CIT(A) to confirm the addition made by the A.O. is without providing reasonable opportunity of being heard in violation of the principles of natural justice and therefore the order passed is bad in law.
2. That without prejudice to the above ground, the action of the Ld. CIT(A) to confirm the addition made by the A.O. of Rs.42,94,837/- on account of unaccounted purchases is illegal and bad in law.
That without prejudice to Ground No.1, the action of the Ld. CIT(A) to confirm the addition made by the A.O. of Rs.21,36,252/- on account of profit arising out of unaccounted purchases is contrary to the material evidences on record and is illegal and bad in law.
That without prejudice to Ground No.1, the action of the Ld. CIT(A) to confirm the addition made by the A.O. of Rs.85,509/- on account of suppressed sale and Rs.2,55,309/- on account of suppressed duty draw- back and Rs. 17,94,240/- on account of disallowance of salary is arbitrary, excessive is illegal and bad in law.
That on the facts and circumstances of the case the action of the AO as confirmed by the Ld. CIT(A) to make addition beyond the scope of ‘limited scrutiny’ without taking prior approval from the higher authority is illegal and bad in law.
That the order of the Ld.CIT(A) confirming the addition made by the A.O. is arbitrary, excessive and illegal.
That the above grounds of appeal
will be argued in details at the time of hearing and the appellant craves leaves to submit additional grounds of appeal if any and or alter, vary, modify or rectify the statement of facts and grounds of appeal at or before the time, of hearing.”
4. At the outset, the ld. counsel for the assessee has invited our attention to the impugned assessment order to submit that the case of the assessee was selected for limited scrutiny on account of examination of the issues relating import turnover mismatch, custom duty payment mismatch, export turnover mismatch and duty draw back received/receivable. The ld. counsel has further invited our Assessment Year: 2015-16 Mukhtar Ahmed attention to the application dated 08.05.2016 filed to the police station as well as newspaper clippings to submit that a devastating fire had broken at the premises of the assessee on 28.11.2015, wherein, the entire records of the assessee along with other property got destroyed. The assessee, therefore, could not present the true picture of its account before the Assessing Officer. The ld. counsel has further inviting our attention to the assessment order submitted that the Assessing Officer gathered from individual transaction statement/CBEC data that during the financial year 2014-15 relevant to assessment year under consideration, the assessee has imported goods amounting to Rs.45,15,405/-. Further, the assessee had made local purchases amounting to Rs.5,84,201/- and inter-state purchase of Rs.712/-. The assessee has shown purchase of only Rs.8,05,481/-. The Assessing Officer, therefore, estimated/calculated the total purchases of Rs.51,00,318/- and after subtracting the purchases shown, the Assessing Officer estimated the unaccounted purchases at Rs.42,94,837/-. The Assessing Officer made the addition of the entire unaccounted purchases. Further, the Assessing Officer applied gross profit rate @49.74% on the said unaccounted purchases and calculated the unaccounted sales at Rs.64,31,089/- and estimated the unaccounted profit at Rs.21,36,252/- and added the same to the income of the assessee. The Assessing Officer further taking note of the VAT returns/CST returns noted that total sales of the assessee were at Rs.44,69,389/-, whereas, the assessee had shown sales in the return of income at Rs.43,83,880/-. He, therefore, added the additional amount of Rs.85,509/- on account of suppressed sales. Further, the Assessing Officer noted that the assessee during the year had received duty drawback of Rs.2,66,549/-. However, the assessee had shown the duty Assessment Year: 2015-16 Mukhtar Ahmed drawback of Rs.11,240/- only. He accordingly added the amount of Rs.2,55,309/- as suppressed duty drawback. The Assessing Officer further noted that the assessee debited Rs.23,88,380/- on account of salary. However, he submitted the revised statement of accounts during the assessment proceedings showing the actual expenses on account of salary/labour charges at Rs.5,94,140/-. He, therefore, added the excess amount of salary of Rs.17,94,240/-.
5. Being aggrieved by the said order of the Assessing Officer, the assessee preferred appeal before the CIT(A), however, remained unsuccessful.
6. We have heard the rival contentions and gone through the record. We note that so far as the issue relating to the addition of Rs.42,94,837/- in relation to investment in unaccounted purchases is concerned, we note that the Assessing Officer has taken the figure of unaccounted purchases/import from CBEC data. The aforesaid information obtained from official data would show that the assessee had made imports/purchases through banking channel and all the investments were made by the assessee out of his already accounted capital income. It is not a case that the assessee has made alleged imports/purchases out of his unaccounted income, the source of which could not be explained. If the assessee has not shown the aforesaid purchases in its P & L A/c, only the profit element relating to the sale of the same, if any, can be added. However, that cannot be the ground to make addition in respect of investments made in imports/purchases by the assessee out of his capital/accounted income, the source of which has not been doubted by the Assessing Officer. In view of this, the addition on account of investment in unaccounted purchases is not Assessment Year: 2015-16 Mukhtar Ahmed sustainable as per law and the same is accordingly ordered to be deleted.
7. So far as the next issue is relating to the addition made by the Assessing Officer of Rs.21,36,252/- is concerned, the Assessing Officer has calculated the unaccounted sale by applying GP rate of 49.74% on the unaccounted purchases, the figures of which have been obtained from CBEC data etc. Though, the ld. AR of the assessee has relied upon the sales shown as per the WBVAT returns for the year under consideration to submit that the total sales of the assessee were of Rs.44,69,389/- only, however, we are not convinced by the above submissions of the ld. AR. The ld. Assessing Officer has obtained figure of unaccounted purchases from the import duty etc., therefore, we take the figure of unaccounted purchases of Rs.42,94,837/- as correct. The Assessing Officer has applied the profit percentage @ 49.74% on the said purchases to arrive at the profit element/sales of the assessee stating that the aforesaid percentage has been obtained as per the average gross profit percentage of the last three years i.e. A.Y 2012-13, 2013-14 & 2014-15. The ld. AR, however, has submitted that the Assessing Officer has wrongly estimated the net profit at 49.74%. The profit percentage of the assessee in previous year was about 6% to 7% only. However, we note that the assessee’s net profit for A.Y 2014-15 was Rs.278414.03/-, whereas, the total sales of the assessee were Rs.6578832/- out of which there were export sales of Rs.5679840/-. The net profit rate of the assessee thus comes at 4.2% for A.Y 2014-15. For the A.Y 2016-17, the assessee has shown net profit of Rs.368632/- ,whereas, the assessee had shown sales of Rs.4095917/- which includes exports sales of Rs.2877969/- and net profit rate of the Assessment Year: 2015-16 Mukhtar Ahmed assessee for A.Y 2016-17 comes @8.99%. If we take the average net profit of the immediately preceding assessment year and immediately proceedings assessment year, the same comes to 6.59%. Therefore, it will be appropriate to apply the net profit rate @6.59% to the total sales of the assessee for the year under consideration. The assessee has already shown the total sales of Rs.4383880/-. Further, the unaccounted purchases taken by the assessee are at Rs.4294737/-. The sales value of the assessee on the unaccounted purchases of Rs.4294837/- will be 4294837 × 106.59 ÷ 100 which comes to Rs.4577866/-. Thus, the total sales of the assessee come for the year under consideration at Rs.8961746/-. If the profit rate @6.59% is applied then the net profit of the assessee come to Rs.590579/-. The assessee has already shown the net profit for the year under consideration at Rs.312946.64/-. Therefore, the addition of Rs.277633 is warranted and accordingly the addition on account of suppressed profit on sales is restricted to Rs.277633/-. 7.1 Since, we have already held that the sales as per the VAT return etc. to be ignored, rather, the total sales have been taken by addition of the unaccounted sales as calculated on the basis of the unaccounted purchases and further adding the same with the sales already shown by the assessee, therefore, any addition on account of sales shown in the VAT return will amount to double addition. Therefore, the addition of Rs.85509/- is ordered to be deleted.
8. The ld. counsel has not pressed the addition on account of suppressed duty drawback, therefore, the addition of Rs.2,55,309/- on account of duty drawback is confirmed.