ALOK RANJAN DASH, PROP: M/S. DASH COMMUNICATIONS,BHUBANESWAR vs. ITO, WARD-5(3), BHUBANESWAR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER

ITA Nos. 139 & 198/CTK/2018 Assessment Year : 2010-2011

Sri Alok Ranjan Dash, Prop. Vs. ITO, Ward 5(3), M/s. Dash Communications, Bhubaneswar. At.Qr. No.S/95, Rail Vihar, PO: Chandrasekharpur, Maitri Vihar, Bhubaneswar. PAN/GIR No.ALAPD 9221 H (Appellant) .. ( Respondent)

Assessee by : Shri Biraja Keshari Kanungo, AR Revenue by : Shri Subhendu Dutta, DR

Date of Hearing : 06/02/ 2019 Date of Pronouncement : 06/02/ 2019

O R D E R Both the appeals filed by the assessee are against the

separate orders of the Commissioner of Income Tax(Appeals)-2,

Bhubaneswar dated 14.2.2017 and dated 11.7.2017 for the

assessment year 2010-11.

emanating from the grounds of appeal, is that the CIT(A) is not

correct and justified in upholding the computation of the Assessing

Officer i.e., in estimating the business profit of the assessee @

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30% of total amount of commission received of rs.18,14,975/- as

net income of the assessee from commission.

lower authorities and carefully gone through the relevant

materials placed on record of the Tribunal. Undisputedly, the

assessee received Rs.3,87,443/- as contract receipts and

Rs.18,14,975/- as commission on total turnover undertaken by

him. The main contention of ld A.R. of the assessee is that the

assessee has earned commission income @ 4% of total turnover

and further sales the SIM card and recharge vouchers through

various retailers and 3% of commission is further extended to

them leaving only 1% commission for the assessee. Ld A.R.

further pointed out that remaining amount of 1% commission is

gross commission income of the assessee out of which

business/revenue expenditure of the assessee has to be allowed.

Ld A.R. submitted that the Assessing Officer was not right in

estimating the business profits of the assessee from commission

@ 30% of total commission receipt as 3% commission, which is

75% of total receipts is further extended to the retailers and out

of remaining 1% commission, the assessee has to incur day to

day business expenditure to operate business activities of the

assessee. Ld A.R,. submitted that therefore, the estimation made

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by the AO and upheld by the CIT(A) is not correct and justified.

Hence, estimation of commission income should be reduced to

30% of Rs.6,60,725/- as estimated by the Assessing Officer. Ld

A.R, submitted that the assessee is not disputing the stand of the

Assessing Officer that section 44AF is not applicable to the present

case. As the assessee has earned income in the nature of

commission from brokerage, which does not fall within the ambit

of said provison. Further, ld A.R. vehemently pointed out that the

lower authorities cannot ignore the fact that the assessee has to

incur day to day expenditure to operate its business out of

commission income. Lastly, ld A.R,. submitted that the Assessing

Officer may kindly be directed to allow the expenditure and

restrict the commission income estimation to 30% of

Rs.6,60,725/-.

made by the Assessing Officer as well as the first appellate order

and submitted that the assessee has already been granted

concession of 70% of total commission receipts which is sufficient

to meet the commission amount extended to the retailers as well

as expenditure incurred by the assessee for day to day business

operation. Ld D.R. submitted that the assessee has not

maintained any books of account and there was no documentary

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evidence showing incurring of expenditure by the assessee for the

purpose of business and for the purpose of earning commission

income. Therefore, the claim of the assessee is baseless and

hence cannot be allowed.

may point out that the total gross contract receipts of the

assessee was Rs.3,87,4543/- on which the Assessing Officer has

applied section 44AD and has estimated income @ 8% of the

contract receipts, which came to Rs.30,995/- and this amount was

added to the income of the assessee leaving balance contract

receipts of Rs.356,448/-, which are sufficient to meet the day to

day business expenditure and other requirements of the assessee.

So far as estimation of 30% of net commission income out of

gross commission receipt is concerned, I am of the considered

view that the AO as well as the CIT(A) has taken a very balancing

view wherein, the Assessing Officer has given concession of 70%

of total commission receipts keeping in view the part amount of

commission which has been extended by the assessee to the

retailers. Therefore, the estimation is based on sound principle of

estimation. At this stage, I may point out that the assessee has

not maintained any books of account and has not submitted any

documentary evidence or facts and figures showing incurring of

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expenditure for the business purposes which is not covered by the

balance amount of Rs.3,56,448/- and 70% of total commission

receipts which has been kept out by the Assessing Officer from the

taxation ambit. In my humble understanding and reasonable

view, the authorities below have taken into account all possible

aspects of leakage of income and expenditure to be incurred by

the assessee while estimating the net commission income and net

contract receipts. Therefore, no further reduction in the

estimation of business profits is required to be made. I may point

out that on being asked by the Bench, ld A.R. could not specify

any head of expenditure which was actually incurred by the

assessee and is not covered out of the amounts of contract

receipts i.e. Rs.3,56,448/- and 70% of commission receipts, which

has been kept aside out of taxation limits by the authorities below.

Therefore, I reached to a logical conclusion that estimation of net

income is quite correct and justified and the CIT(A) is also right in

upholding the same. No interference is called for with the orders

of lower authorities below. Hence, I uphold the same and dismiss

the ground of appeal of the assessee.

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is that the CIT(A) is not justified in confirming the levy of penalty

of Rs.25,000/- under section 271A of the Act.

materials available on record. Ld A.R. submitted that in view of

the order of the ITAT Chandigarh in the case of ACIT vs Anil

Luthra (2001) 116 Taxman 126(Chd) and Delhi Bench of the

Tribunal in the case of 91 TTJ (Del)26, is it clear that neither the

Act nor the Rule prescribes the type of books of account to be

maintained by the assessee. Therefore, penalty cannot be levied

against the assessee.

authorities, submitted that when the assessee has not maintained

any books of account, the authorities below have no alternative

option but to impose penalty. Therefore, same may kindly be

confirmed.

first year of business of the assessee and the assessee was under

bonafide belief that since he falls within the ambit of provisions of

section 44AF of the Act, therefore, did not maintain any books of

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account. Hence, penalty imposed by the Assessing Officer may

kindly be cancelled.

(1) of section 272AA or sub­section (1) of section 272BB or clause (b) of sub­section (1) or clause (b) or clause (c) of sub­section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure."

The above section provides that if the assessee proves that there

is a reasonable cause, he is not subject to levy of penalty. In the

present case, the contention of the assessee is that he was under

Bonafide belief that he is not required to maintain books of

account. Even if it is assumed that the assessee had an obligation

to maintain regular books of account, which he failed to do, the

failure is definitely due to a reasonable cause and the case is

covered under the provisions of section 273B of the Act.

Supreme Court in the case of Hindustan Steel Ltd. Vs State of

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Orissa, 83 ITR 26(SC), that penalty proceedings are quasi-

criminal in nature and it must be brought on record by the

Assessing Officer that the assessee has deliberately acted in

defiance of law or was guilty of conduct contemptuous or

dishonest but in the reasoning given by the Assessing Officer in

the assessment order, nothing has been mentioned. Therefore, I

am of the considered view that the assessee under Bonafide

belief, had not maintained books of account. Hence, I set aside

the orders of lower authorities and delete the penalty of

Rs.25,000/- u/s.271A of the Act and allow the grounds of appeal

of the assessee.

Order pronounced on 06/02/2019.

Sd/- (Chandra Mohan Garg) JUDICIALMEMBER Cuttack; Dated 06/02/209 B.K.Parida, SPS

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Copy of the Order forwarded to : 1. The Appellant : Sri Alok Ranjan Dash, Prop. M/s. Dash Communications, At.Qr. No.S/95, Rail Vihar, PO: Chandrasekharpur, Maitri Vihar, Bhubaneswar

Sr. Pvt. Secretary, ITAT, Cuttack

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