SURINDER KATYAL,NEW DELHI vs. ACIT, CIRCLE- 49(1), NEW DELHI
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Income Tax Appellate Tribunal, DELHI BENCH, ‘G’: NEW DELHI
Before: SHRI SHAMIM YAHYA & SHRI CHANDRA MOHAN GARG
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘G’: NEW DELHI
BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER
ITA Nos.6788 & 6789/DEL/2017 [Assessment Years: 2013-14 & 2014-15]
Surinder Katyal, ACIT, C-1/99, Janakpur, Circle-49(1), New Delhi-110058 Vs New Delhi PAN-ALSPK2609N Assessee Revenue
Assessee by None Revenue by Sh. Abhishek Kumar, Sr. DR
Date of Hearing 30.11.2022 Date of Pronouncement 30.11.2022
ORDER PER SHAMIM YAHYA, AM,
These appeals filed by the assessee are directed against the
respective orders of the Ld. CIT(A)-17, New Delhi, both dated 21.08.2017
pertaining to Assessment Years 2013-14 & 2014-15, respectively.
Since, the issues are common and connected and the appeals were
heard together, these are being consolidated and disposed of together for
the sake of convenience.
For the sake of reference, we are reproducing the grounds of
appeal for AY 2013-14.
“1. That the order of the A0 and Ld. CIT(A) are bad at law and are against the principle of natural justice.
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That the CIT(A) has erred while framing order as CIT(A) inferred on purely assumption basis without any evidence that the purchases were found to be bogus and the appellant has made investments for achieving the undisclosed turnover (difference between receipts as per Form 26AS and as disclosed in ITR filed) out of books of accounts and decided the profit element of the undisclosed turnover at the rate of 40% while the appellant had produced all the books of accounts before the AO and the AO has found neither any type of bogus purchases nor any investment out of books of accounts but the AO simply said in his order that books of accounts were not got audited under section 44AB of the Income Tax Act, 1961, which is against the law and principle of natural justice.
That the AO has erred in treating the entire undisclosed turnover of Rs.1,13,62,297/- (difference between receipts as per Form 26AS and as disclosed in
IT filed) as income of the assessee while only the profit element out of such undisclosed turnover should have been assessed, that may be 5% to 6% or 8% under section 44AD depending upon the facts and circumstances of the case which is against law and principle of natural justice
That on the facts and circumstances of the case, the learned AO was unjustified in rejecting the books of accounts of the assessee produced during the course of assessment merely on the grounds that the books of accounts of the assessee were not audited.
That it is the general principle and law, that one has to pay Income Tax only on the amount of Income/Profit earned and not on total receipts. The learned A0 has ignored such principle/law and has erred in adding back entire receipts in place of profit out of such receipts it is against principles of natural justice.”
In the case, the Assessing Officer noted that as per the Profit &
Loss account of the assessee, the assessee has shown gross receipts/sale
of Rs.79,52,150/-. However, as per Form 26AS business receipt comes
to Rs.1,93,14,447/-. Further, as per 26AS, salary receipt comes to
3 ITA Nos.6788 & 6789/Del/2017
Rs.30,83,752/-. However, the assessee has shown salary income of
Rs.27,86,172/- only. The AO enquired from the assessee the reason for
the difference. However, there was no response from the assessee. The
AO further noted that the assessee has claimed whole TDS amount of
Rs.10,71,327/- deducted by various parties against the total receipt of
Rs.2,23,98,199/-. Hence, he held that onus was upon the assessee to
claim right amount of TDS. He noted that at one hand, the assessee has
taken credit of whole TDS but on another hand, he has not considered
the corresponding whole receipt in his ITR. Hence, the AO added the
difference of Rs.1,16,59,877/- under the head business receipt and
salary receipt to the income of the assessee.
Against the above order, the assessee appealed before the Ld.
CIT(A).
Before the Ld. CIT(A), it was claimed that in difference of receipt as
per 26AS and as per Income Tax Return cannot be taken as business
profit. It was claimed that in the business of plumbing contracts related
to installation of fire fighting equipments in which the profit margin is
4% to 5%, the material cost is 65% to 70%, labour cost is 18% to 20%
and other management and administrative expenses are 8% to 10%. The
Ld. CIT(A) considered the same. Thereafter, the Ld. CIT(A) referred to few
case laws, which reads as under:-
i. M/s General Mechanical Works vs ACIT in ITA No.2032/Ahd/2010. ii. ITO vs Shri Gumanmal Misrimal in ITA Nos.2536,2537, 2575 & 2576/Ahd/2008
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iii. CIT vs Sathyanarayan P Rathi in Tax appeal no.607 of 20012 (Guj. HC) 7. The Ld. CIT(A) granted part relief by concluding as under:-
“From the above narration, it is seen that in all the above decisions which are basically cases where the purchases were found to be bogus, the estimation of profit is approx. 30%, since, the profit involves various elements of benefit when the transactions are rendered in cash. It cannot be the case of the appellant that for earning the unaccounted receipts, the entire expenses were incurred by obtaining proper bills and by making payments through cheques. Has that been the case and had it been a case of a simple error where by mistake the actual receipts were not reflected in the books of accounts, in that case the appellant would have furnished the entire evidence of expenses incurred for earning the receipts during the course of assessment or appellate proceedings. The fact that the appellant has failed to produce such evidence shows that the expenses have teen incurred in cash and without bills. Besides, there is also the element that for purpose of incurring such expenses, the appellant has made investment outside the books of accounts. As discussed above, 10% capital investment is required for the purpose of achieving the turnover against which the appellant has reflected only 1.5% in his books of accounts. In the various judicial pronouncements cited above the various courts have estimated the profit element at 30% where the purchases were bogus. In the case of the appellant the actual receipts have not been reflected in the books of accounts. Thus, in this case, the estimation is a percentage of sales rather than of purchases. Keeping in view all these facts including the capita! investment required for achieving the turnover (which has been computed at 10% of the total turnover), contravention of sec.40A(3) and the various judicial pronouncements cited above which have estimated the profit at 30% of the purchases, the profit element is arrived at 40%. Thus, on the unaccounted turnover of Rs.1,13,62,297/-, the addition on account of unaccounted profit earned outside the books of account and the peak investment made for achieving that turnover is computed at 40%. The addition made by the Assessing Officer is thus partly confirmed and the appellant gets part relief.
5 ITA Nos.6788 & 6789/Del/2017
In case of unaccounted salary not reflected in the IT and but appearing in Form 26AS, since, there is no expenditure involved for earning the salary, therefore, the entire addition on account of unaccounted salary of Rs.2,97,580/- made by the AO is confirmed and the appellant does not get any relief on this account.
The AO is directed to give benefit of TDS deducted as per Form 26AS after carrying out necessary verification. Keeping in view the above discussion, the appellant gets part relief.”
Against this order, the assessee is in appeal before us.
We have heard the Ld. DR and perused the record. None appeared
on behalf of the assessee despite service of notices. Upon careful
consideration, we note that the AO has found the difference of amount
shown as business receipt and salary receipt as per 26AS statement and
that reflected by the assessee in the Income Tax return. No explanation
for this was given to the AO. However, before the Ld. CIT(A), it was
contended that the entire receipt cannot be taken as income as profit
element 4 to 5%. The Ld. CIT(A) has considered this submission and he
has analyzed the profit & loss account and balance sheet submitted by
the assessee and found various inconsistencies. On the basis of the
inconsistency, the Ld. CIT(A) did not accepted this submission of the
assessee. The Ld. CIT(A) has referred to several case laws and after
examining the same, he has granted part relief to the assessee by
directing to tax 40% of unaccounted turnover as profit. Nothing has
been brought before us to controvert the above order of the Ld. CIT(A),
hence, we affirm the same.
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Our above order applies mutatis mutandis to Assessment Year
2014-15 as well.
In the result, both appeals of the assessee are dismissed.
Order pronounced in the open court on 30th November, 2022.
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