DCIT, ROURKELA vs. SHRI PRASHANT KUMAR AHLUWALIA, SUNDERGARH

per the provisions of the Act, then the assessee by placing reliance on the

decision of ITAT Bangalore in the case of Shri G.T.Umesh (supra) cannot

allege that the gross profit addition on estimate basis cannot be made

without rejecting the books of account of the assessee.

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assessment order, when the assessee has himself voluntarily offered 56%

gross profit rate then, it was not required from the AO to do further enquiry

or exercise u/s.145(3) and u/s.144 of the Act and the assessee cannot play

hot and blow at the same time by challenging the partly confirmed addition

by way of non-maintainable appeal. Ld CIT DR submitted that there is no

whisper in the order of the first appellate authority as to why ld CIT(A)

reduced the gross profit from 56% to 55% and, therefore, it has to be

presumed that the reduction of gross profit by the ld CIT(A) has been done

without application of mind and without considering the facts and

circumstances of the case without any cogent, justified and reasonable

cause as noted in para 4 of the assessment order by the AO. Ld CIT DR

lastly contended that there is no logic to reduce G.P. from 56% to 55%

without any basis by partly allowing non-maintainable appeal, thus, ld

CIT(A) is not competent and eligible to grant any relief to the assessee.

Therefore, the order of the ld CIT(A) may kindly be set aside by restoring

that of the order of the Assessing Officer.

addition has been confirmed by the ld CIT(A), then, the assessee has right

to file appeal before the Tribunal and the appeal cannot be held as non-

maintainable only because the assessee was agreed to any addition before

the AO, without considering surrounding facts and circumstances of the

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issue. Ld A.R. also submitted that the assessee never agreed for such

estimation of addition @ 56% neither before the AO nor before the ld

CIT(A). Therefore, the contentions and arguments made by ld CIT DR

should be rejected and the gross profit as declared by the assessee @

53.88% should be allowed by directing the AO to delete the entire addition

on this issue.

place rejoinder on behalf of revenue on the department’s appeal, therefore,

with the direction and permission of the Bench, ld CIT DR submitted that

no ground has been raised by the assessee before the ld CIT(A) challenging

the addition on the allegation or contention that he was never agreed to the

addition @ 56% of gross profit as per Settlement Commission order for

immediately preceding seven assessment years and, therefore, the assessee

cannot be allowed to make a new case at this belated stage before the

Tribunal. He also submitted that neither in the form 35 submitted before

the ld CIT(A) nor in the Form No.36 submitted before the Tribunal there is

no such ground or contention of the assessee that he never agreed to

estimate of 56% of sales/turnover before the AO during assessment

proceedings, as noted by the AO, in para 4 of assessment order, thus, it has

to be presumed that the assessee was, in fact, voluntarily agreed to this

addition and he can not be deemed as aggrieved/person by this agreed

addition.

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it appropriate to adjudicate the legal contention of ld CIT DR that the

appeal of the assessee is not maintainable against addition made by the Ao

and partly confirmed by the ld CIT(A) on agreed basis during assessment

proceedings. As per section 246A of the Act, any assessee agreed by any

of the orders as listed in clause (a) of sub-section (1) of Section 246A of the

Act including an assessment order passed u/s.143(3) of the Act may file

appeal to the Commissioner of Income Tax (Appeals). At the same time,

we further observe that as per various decisions as relied by ld CIT DR,

including the decision of Hon’ble Kerala High Court in the case of

Vamadevan Bhanu,(supra), the appeal of the assessee is not maintainable if

assessment has been made on agreed basis. Similar view has been

expressed by Hon’ble High Court in the case of Ramesh chandra and

Company (supra) in the case of Banta Singh Kartar Singh (supra) and in

the case of Ramanlal Kamdar(supra).

the Act alongwith the proposition laid down by various High Courts, as

respectfully noted above, it is clear that when the assessee, during the

assessment proceedings, has agreed to a particular addition, then he

cannot be held aggrieved by such addition or disallowance, enabling him to

file appeal before the ld CIT(A) u/s.250 of the Act. Keeping in view of

above legal position and proposition laid down by Hon’ble High Courts

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(supra), when we analyze the impugned addition made by the AO, then

from para 4 of the assessment order, we find that the AO has made

addition with the following observations:

“ Estimation of gross profit @ 56%

Previous to the current search & seizure, one more search was conducted on 12.11.2009 u/s.132 of the I.T.Act, 1961. The assessee filed settlement application u/s.245C on 9.9.2011 before the Settlement Commission (IT &WT), Additional Bench, Kolkata on 9.9.2011. The ld Settlement Commission passed order u/s.245D(4) of the Act on 28.3.2013 for the A.Y. 2004-05 to A.Y. 201-2011 by estimating gross profit @ 56%. The assessee agreed for 56% of gross profit in front of Settlement Commission. During the current year, the assessee has shown gross profit of Rs.126,02,13,669/-, which is 53.88% of total sale. The assessee vide order sheet entry dated 28,.2.2014 is agreed for estimation of gross profit @ 56% of total sale as computed and estimated by Settlement Commission. Therefore, gross profit @ 56% of the total sale is calculated at Rs.4,94,60,515/- “ 14. In view of above observation and findings of the Assessing Officer, it

is clearly discernible that when the assessee vide order sheet entry dated

28.2.2014 had agreed for estimation of gross profit @ 56% on total sales,

as computed and estimated by Settlement Commission for immediately

preceding seven assessment years i.e 2004-05 to 2010-2011 and

consequently, the AO without making any further enquiry or action available

to him u/s.145(3) and 144 of the Act estimated the gross profit @ 56% on

total sales/turnover.

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A.R. of the assessee that the assessee had never agreed to such estimation

during the assessment proceedings before the AO as per the line of

Settlement Commission. From Form 35, statement of facts and grounds of

appeal filed by the assessee before the ld CIT(A), we are unable to see any

allegation on Ground No.3 that the assessee was never agreed for addition

on estimate basis @ 56% of sale/turnover during assessment proceedings

before the AO. Further, ld A.R. has also filed copy of the written submission

submitted before the ld CIT(A) on 31.3.2014 and on carefully reading of the

written submission filed before the ld CIT(A), we are also unable to see any

contention to challenge the addition made on estimate basis @ 56% that

the assessee was never agreed to such addition before the AO. From the

carefully vigilant reading of written submission para 3 to 3.4, it is very much

clear that the assessee has challenged the gross profit addition made by the

AO by alleging that doctrine of res judicata is not applicable to income tax

proceedings, therefore, the order of Settlement Commission cannot be

accepted but there is no whisper in the written submission that the

assessee was not agreed to estimated addition @ 56% of sales/turnover by

the AO. Similarly, from the Form No.36 filed before the Tribunal, the

assessee has not taken any ground that the assessee during assessment

proceedings before the AO never agreed to estimate of gross profit @ 56%

in the line of order of Settlement Commission from A.Y. 2004-05 to 2010-

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2011. Thus, we safely presume that the assessee neither before the ld

CIT(A) nor before this Tribunal alleged or agitated the issue of estimate of

gross profit @ 56% of sales/turnover by stating that the assessee was

never agreed to such addition before the AO.

reproduce the relevant paras of the ld CIT(A) order at pages 11 to 12 as

follows:

…….

“ r) There is therefore, every possibility that the Department and society are absorbing risks and incurring higher costs of collection created by the ambiguity surrounding the affairs of the Appellant. The Appellant is liable and duty bound to reimburse these applicable risks and costs. Such reimbursement must provide adequate recompense for the time and effort taken and expense incurred by Revenue in effecting assessment and collecting taxes due, and will also help Revenue realize returns in line with the risks absorbed by it. The attendant risks also include those generated by the possibility that the Appellant may be encouraged to employ tactics similar to those employed in the instant case in future. Therefore, the action of the AO in estimating the GPM at a figure higher than the reported value of 53.88% is not entirely unjustified and is upheld. What remains therefore is what needs to be the value of the GPM adopted.

It is indubitably clear that the figure of 56% adopted by the ITSC relates to the affairs of the Appellant, and therefore in any case involving estimations, constitute a fair and reasonable basis bearing reasonable nexus to the available material and the circumstances of the case. The figure of 56% is not wild, capricious or arbitrary, and is considered reasonable in accordance with the principles of justice, equity and good conscience.

t) The Appellant has also argued that the assessee accepted the GP estimated by the ITSC to buy peace. It is held in this connection that

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the "buying of peace" was necessarily the result of discovery of pejorative evidences and adverse findings by the Department and protracted negotiations and/or litigation by the Appellant with the Department and ITSC. The "buying of peace" cannot be held to automatically construe that a higher than usual or normal rate of GPM has been adopted. Also, according to the Appellant, the ITSC had estimated the GP @ 56% of the total sales matte by the assessee for the AY 2004-05 to 2010-11 and hence, the said rate was not applicable in this assessment year. The Appellant thereafter stated that it was a well settled that "each assessment year is a separate self-contained period and the doctrine of res judicata is not applicable to income tax proceedings". The ratio of the Hon'ble Supreme Court in the case of Instalment Supply (P) Ltd. v. Union of India, (1962) 2 SCR 644, 658 was cited which held that "it was well settled that in the matter of taxation there is no question of res judicata because each year's assessment is final only for that year and does not govern later years". The ratio of the Supreme Court in the case of New Jehangir Vakil Mills Co. Ltd. vs CIT, (1963) 49 ITR 137 was also cited which observed that the extent to which a decision given by an Income-tax Officer for one assessment year

u) In both the connections above, it is held by this office that the GPM reported by the Appellant for the impugned F.Y. 2010-11 of 53.88% has not been ignored and has rather been adopted as the basis for the computations of income in this order. The only difference is that due allowance has been given for statistical variations generated as a result of business dynamics, accounting practices, et al for which the figure adopted by the ITSC has been considered.

v) It is also not inconceivable when seen that what is being analyzed is the running of a large conglomerate, the figure arrived at by the ITSC factors in a reasonable variation (standard deviation). Considering all the facts and circumstances of this case, the said variation is estimated to be 1%, following which the GPM to be adopted is computed at 55%. This amounts to a "vote-of-confidence" of 1.12% (55% less 53.88%) in the accounts and affairs of the Appellant. This is analogous but not equivalent to a 98.88% Confidence Interval around the real mean founded in the subject of Statistics. The "premium" of 1.12% can also be considered to be the recompense to the Government in absorbing the risks and incurring higher costs of collection created by the ambiguity surrounding the affairs of the Appellant created through sampling in the audit of accounts and business dynamics.

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w) The addition/assessment made on the count of differential GPM is therefore computed at 1.12.% (55% less 53.88%) of the Net Sales Turner (less Mining Royalty) of Rs. 233,87,03,900, which arrives at Rs. 2,61,93,484.”

the ld CIT(A), in para (r) (supra) noted that the action of the Assessing

Officer in estimating gross profit margin (GPM) at a figure higher than the

reported value of 53.88% is not entirely unjustified and is upheld.

Thereafter, the ld CIT(A) in the same para stated that what remains

therefore is what needs to be the value of the GPM adopted. Ld CIT(A)

also observed that it is indubitably clear that the figure of 56% adopted by

the ITSC relates to the affairs of the appellant, and, therefore, in any case

involving estimations, constitute a fair and reasonable basis bearing

reasonable nexus to the available material and the circumstances of the

case. In the same para, the ld CIT(A) further observed that the figure of

56% is not wild, capricious or arbitrary, and is considered reasonable in

accordance with the principles of justice, equity and good conscience.

Thereafter, in para (t) (supra), the ld CIT(A) noted the contention of the

assessee and in subsequent para (u) (supra), noted that the GPM reported

by the Appellant for the impugned F.Y. 2010-11 (relevant to assessment

year 2011-12) of 53.88% has not been ignored and has rather been

adopted as the basis for the computations of income. The ld CIT(A) further

observed that the only difference is that due allowance has been given for

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statistical variations generated as a result of business dynamics, accounting

practices, at all which the figure adopted by the ITSC has been considered.

not inconceivable when seen that what is being analyzed is the running of a

large conglomerate, the figure arrived at by the ITSC factors in a

reasonable variation (standard deviation). In the same para, ld CIT (A) also

observed that the said variation is estimated to be 1%, following which the

GPM to be adopted is computed at 55% and this amounts to a "vote-of-

confidence" of 1.12% in the accounts and affairs of the Appellant. Ld

CIT(A) observed that this is analogous but not equivalent to a 98.88%

Confidence Interval around the real mean founded in the subject of

Statistics. The "premium" of 1.12% can also be considered to be the

recompense to the Government in absorbing the risks and incurring higher

costs of collection created by the ambiguity surrounding the affairs of the

Appellant created through sampling in the audit of accounts and business

dynamics. With these hypothetical observations, without any factual matrix

and only based on surmises and conjunctures, ld CIT(A) reduced the gross

profit margin from 56% to 55% granting part relief to the assessee.

order (supra in para 12 of this order), it is clear that in the line of ITSC

order for preceding assessment years 2004-05 to 2010-2011, the assessee,

before the AO during the assessment proceedings, agreed to estimation of

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gross profit @ 56% of sales/turnover and this act of the assessee obviously

stopped the AO from making further enquiry or observations and going

deep into the books of account of the assessee and to take recourse of

procedure mandated in section 145(3) of the Act. Thus, in our humble

understanding, the assessee cannot be held as aggrieved from such

addition which has been made on the voluntary consent of the assessee

before the AO during assessment proceedings in the line of the Income Tax

Settlement Commission. Therefore, first of all, we safely presume that the

appeal of the assessee was neither maintainable before the CIT (A) nor

before this Tribunal in view of the various decisions, as relied By ld CIT DR

including the decision of Hon’ble Kerala High Court in the case of

Vamadevan Bhanu (supra). Therefore, in our considered opinion, firstly, ld

CIT(A) has admitted and adjudicated the appeal which was not

maintainable as per provisions of section 246A r.w. 250 of the Act.

Secondly, from relevant operating paras, as reproduced hereinabove, in

para 15 of this order, including para (r) (supra), it is also clear that the ld

CIT(A) held that the action of the AO in estimating the gross profit margin

at the figure higher of 56% of sales/turnover than the reported value of

53.88% is not entirely unjustified and same is upheld. Thereafter, the ld

CIT(A) after noting the arguments of the assessee recorded hypothetical

observation without any basis only based on surmises and conjunctures

and without referring to the financial results of the assessee, without

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referring to ITSC order and voluntary consent of assessee for estimating GP

rate @ 56% of sales/turnover and reduced the GPM from 56% to 55%

ignoring vital facts supporting the action of the AO. Therefore, in our

opinion, ld CIT(A), first of all, admitted and adjudicated the non-

maintainable appeal and, therefore, gave relief to the assessee without any

justified reason and legal basis tenable under provisions of the Act.

Therefore, the order of the ld CIT(A) on both counts is not sustainable and

valid, therefore, we dismiss the same.

consider preposition rendered by the ITAT Bangalore in the case of Shri

G.T.Umesh (supra) in view of facts and circumstances of the present case.

In that case, the AO estimated profit by applying G.P. rate @ 20% without

rejecting books of account of the assessee and the AO did not make any

addition on the agreement or consent of assessee. But in the case in hand,

the assessee during assessment proceedings before the AO, voluntarily

agreed to the estimation of G.P. @ 56% of sales/turnover and impliedly

stopped the AO from making any further enquiry or going deep into the

issue referring to the books of account of assessee. Thus, facts and

circumstances of the present case are quite dissimilar and distinct from the

case of Shri G.T.Umesh (supra). Therefore, we are of the humble opinion

that the benefit of the ratio of the order of ITAT Bangalore in the case of

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Shri

G.T.Umesh (supra) is not applicable to the present case in hand.

assessee raised by way of cross appeal in ITA No.01/CTK/2015. Ld A.R. of

the assessee challenging the part confirmation of addition by the ld CIT(A)

submitted that the ld CIT(A) has erred in estimating the GPM @ 55% of

sales/turnover and thereby confirming the addition to the extent of

Rs.2,61,93,484/- out of total addition of Rs.4,94,60,515/- made by the AO

in estimating the GP @ 56% of the sales/turnover without finding any

defect in the books of the assessee and without taking recourse of section

145(3) of the Act. Therefore, ld counsel placing reliance of the order of

ITAT Bangalore in the case of Shri G.T.Umesh (supra), vehemently

contended that the addition partly sustained by the ld CIT(A) is wrong and

need to be deleted.

para 4 of assessment order, we may also point out that when the appeal of

the assessee was not maintainable before the ld CIT(A) who allowed part

relief to the assessee, then on the same hypothesis , the appeal of the

assessee against partly confirmed addition cannot be held as maintainable

and allowable before the Tribunal. Even if we consider the merits of the

addition, then we find that the AO in para 4 of the assessment order clearly

noted that the assessee voluntarily agreed for 56% of gross profit in front

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of the Settlement Commission and the assessee is also agreed for

estimation of 56% of the total sales/turnover in the light of Settlement

Commission order passed for immediately previous seven assessment years

for A.Y. 2004-05 to 2010-2011, for the year under consideration for A.Y.

2011-12. Therefore, we are unable to see any valid reason to interfere with

the addition made by the AO in the line of the order of the Settlement

Commission for immediately seven preceding assessment years by

accepting voluntary consent of the assessee during assessment

proceedings. We may reiterate that from Form No.35 filed before the first

appellate authority & Form No.36 filed before this Tribunal, neither before

the ld CIT(A) nor before the Tribunal, the assessee has not made any

allegation or contention or ground alleging that he was never agreed before

the AO for estimation of GP @ 56% in the line of the order of Settlement

Commission (supra). Therefore, the assessee cannot challenge the same by

way of a non-maintainable appeal before the Tribunal at this belated stage.

This contention was first time raised during arguments before this Bench on

26.8.2020 but in our humble opinion, the assessee cannot be allowed to

make a new case before the Tribunal at this belated stage without raising

any ground before the ld CIT(A) and Tribunal.

that the AO was right in making addition on the consent of the assessee

and keeping in view the order of ITSC for immediately previous seven

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assessment years by estimating G.P @ 56% of sales/turnover. We also hold

that the ld CIT(A) has granted part relief to the assessee in a non-

maintainable appeal without any valid basis, thus, same is not sustainable

and thus, we set aside the same.

assessee is dismissed.

Order pronounced on 17 /09/2020.

Sd/- sd/- (Laxmi Prasad Sahu) (Chandra Mohan Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 17 /9/2020 B.K.Parida, SPS(OS) Copy of the Order forwarded to : 1. The Appellant : /Assessee: Shri Prashant Kumar Ahluwalia, DD-2, Civil Township, Rourkela

By order

Sr.Pvt.secretary ITAT, Cuttack

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