NARENDRA KUMAR BEHERA,BOUDH vs. ITO, PHULBANI WARD, PHULBANI, PHULBANI

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ITA 93/CTK/2019Status: DisposedITAT Cuttack13 May 2019AY 2014-154 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal observed that the turnover limit for Section 44AD was increased and the profit estimation percentage reduced. Considering the assessee's business in a remote area with low profit margins, the Tribunal reduced the net profit estimation from 8% to 6%.

What were the facts?

The Assessing Officer estimated the assessee's net profit at 8% on total bank deposits of Rs. 1,48,24,129/-, adding Rs. 6,64,757/- to the income, as the assessee was not maintaining books of account and disclosed a turnover of Rs. 65,14,665/-. The assessee argued that the estimation was excessive and should be reduced to 4% for footwear trading.

What were the issues?

Whether the estimation of net profit at 8% under Section 44AD was justified when the turnover exceeded the monetary limit, and if the estimation should be reduced based on business nature and location.

Which sections of the Income-tax Act were involved?

Section 44AD,Section 147

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK

Before: SHRI CHANDRA MOHAN GARG

For Appellant: Shri G Naik/Rajat Kar/S.K.Sarangi, ARs
For Respondent: Shri Subhendu Dutta, DR
Hearing: 26/04Pronounced: 13/05

This is an appeal filed by the assessee against the order of

the Commissioner of Income Tax(Appeals)-1, Bhubaneswar dated

18.1.2019 for the assessment year 2014-15.

2.

Grounds of appeal raised by the assessee are as under:

“1. For that the order dated 8.1.2019 for the A.Y. 14-15 passed by the CIT(A) is far from just and legal on the facts and in the circumstances of the case. 2. For that the initiation of reassessment proceedings u/s.147 of the I.T.Act by the AO and confirmation of the

P a g e 1 | 4 same by the CIT(A) is illegal and without jurisdiction on the facts and in the circumstances of the case. 3. For that the CIT(A) is not justified to confirm the order of the AO in estimating profit @ 8% u/s.44AD of the I.T.Act when the sales turnover of the assessee has exceeded the monetary limit of Rs.1 crore on the facts and in the circumstances of the case.” 3. At the time of hearing, ld A.R. of the assessee did not press

Ground No.1 and 2 of appeal, hence, same are dismissed as not

pressed.

4.

Ground No.3 relates to estimation of profit @ 8% on the

entire bank deposits.

5.

The Assessing Officer noticed that the assessee had made

cash/cheque deposits amounting to Rs.1,48,24,129/- in the bank

accounts of Uco Bank, State Bank of India and Utkal Grameen

Bank, Boudh. The Assessing Officer also observed that the

assessee is not maintaining books of account u/s.44AD and

disclosed turnover of Rs.65,14,665/-. In absence of books of

account, the Assessing Officer estimated the net profit of the

assessee at 8% u/s.44AD of the I.T.Act, 1961 considering the

total bank deposits of Rs.1,48,24,129/-, the Assessing Officer

estimated net profit at 8% u/s.44AD and added Rs.6,64,757/- to

the income of the assessee, which was confirmed in first appeal.

P a g e 2 | 4

6.

At the time of hearing, ld A.R. submitted that the estimation

of net profit at 8% is excessive and same should be reduced to

4% as the assessee is in footware trading business in the Boudh

district. Ld A.R relied on the decision of Hon’ble Delhi High Court

in the case of Mohd Asif Habibr, vs PR.CIT in I.T.A. No.36 of 2015

dated 20.8.2018 and contended that provisions of section 44AD

does not apply as the turnover of the assessee has exceeded Rs.1

crore and net profit @ 8% is illegal.

7.

Ld D.R. supported the orders of the lower authorities and

submitted that the estimation has been made as per the

disclosure of the assessee on a turnover of Rs.65,14,665/-.

8.

After hearing the rival submissions and perusing the orders

of lower authorities, I observe that as per the amendment made

by the legislature in the Finance (No.2)Act, 2014 w.e.f. 1.4.2013,

the turnover of Rs.1 crore has been substituted by Rs.2 crores and

the percentage of estimation of profit has been reduced to 6%. I

also observe that the while applying net profit 2 8%, the

Assessing Officer has not brought on record any comparable

cases. Another aspect has to be taken into consideration that the

assessee is carrying on its business activities in Boudh district, a

remote area, where the profit margin is very low. Therefore,

P a g e 3 | 4 looking into the totality of the facts and circumstances of the case

and that considering the fact that the assessee is in foot-ware

trading business, as noted above, I found it appropriate to reduce

the estimation of net profit from 8% to 6%. The Assessing Officer

is directed to recompute the net profit accordingly.

9.

In the result, appeal of the assessee is partly allowed.

Order pronounced on 13/05/2019. Sd/- (Chandra Mohan Garg) JUDICIALMEMBER Cuttack; Dated 13/05/209 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Narendra Kumar Behera, FCI Road, Phulbani, Dist: Kandhamal

2.

The Respondent. ITO, Phulbani Ward, Phulbani 3. The CIT(A)-1, Bhubaneswar 4. Pr.CIT- 1, Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//

By order

Sr. Pvt. Secretary, ITAT, Cuttack

P a g e 4 | 4

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