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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI KULDIP SINGH & SHRI GAGAN GOYAL
O R D E R
Per : Kuldip Singh, Judicial Member:
The appellant, Shri Siddiq Sattar Rawani (hereinafter referred to as ‘the assessee’) by filing the present appeal, sought to set aside the impugned order dated 14.12.2021 passed by the Commissioner of Income Tax (Appeals)-16-Z, Thane [(hereinafter referred to as CIT(A)] qua the assessment year 2009-10 on the grounds inter alia that:- “1. On the Facts and in the circumstances of the case and in law the learned CIT (A) has erred in confirming the learned Income-tax officer order for estimating commission income at 8% of consignment sales instead of correct 2.5% on consignment sales.
2 Shri Siddiq Sattar Rawani 2. On the Facts and in the circumstances of the case and in law the learned CIT (A) has erred in confirming the total disallowance of expenditure of Rs. 8S824/- claimed during course of assessment by the learned Income tax officer.
On the facts and in the circumstances of the case and in law, learned CIT (A) has erred by treating Rs.10,00,000/- as income out of total contract receipts of Rs.10,52,629 by allowing meager expenses of Rs. 52,629/-only.
4. On the facts and in the circumstances of the case and in law, learned CIT (A) has erred by not taking income at Rs. 84210/- being 8% of the contract amount of Rs.1052629/- under section 44 AD of Income tax Act, 1961.
5. The Appellant craves leave to add, alter, amend or delete any ground of appeal either before or during the course of hearing of the appeal.”
2. Briefly stated facts necessary for adjudication of the controversy at hand are: assessee was working as a commission agent and contractor during the year under consideration and filed computation of income by showing net profit at Rs.2,80,378/- on estimation basis @ 2.5% of the total turnover of Rs.1,12,15,138/-. On receipt of information from Income Tax Officer (Inv.), Thane regarding cash deposit of Rs.8,28,109/- in the savings accounts No.623501515762 of the assessee maintained with ICICI Bank Jogeshwari Branch, Mumbai, assessment was reopened by initiating the proceedings under section 147/148 of the Income Tax Act, 1961 (for short ‘the Act’). Assessee filed requisite details. Assessing Officer (AO) in the absence of necessary documents of the business and at the offer of A.R. along with assessee assessed the commission income at 8% of the total turnover and thereby made an addition of Rs.6,16,833/- to the total income of the assessee. AO also noticed that the assessee has carried out a contract job of Rs.10,52,629/- during the year under consideration for M/s. Rayh Healthcare Pvt. Ltd. in the last week of March 2009 3 Shri Siddiq Sattar Rawani and thereby offered an amount of Rs.10,52,629/- for taxation, thus AO added Rs.10,52,629/- for taxation to the total income of the assessee as undisclosed business income. AO thereby framed the assessment at the total income of Rs.19,25,860/- under section 143(3) read with section 147 of the Act.
3. Assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has partly allowed the same. Feeling aggrieved with the impugned order assessee has come up before the Tribunal by way of filing present appeal.
Notice sent for the service of the assessee for 23.11.2021 through RPAD, thereafter for 30.12.2021 and on 14.02.2022 not received back served or unserved and presumed to have been served upon the assessee but none appeared. So the Bench proceeded to decide the case on the basis of material available on record with the assistance of the Ld. D.R. for the Revenue.
We have heard the Ld. Departmental Representative for the Revenue, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and case law relied upon.
Ground No.1 6. Undisputedly, assessee has shown net profit of Rs.2,80,378/- @ 2.5% of the total turnover of Rs.1,12,15,138/-. It is also not in dispute that assessee has not got his books of accounts audited under the Act. It is case of AO as well as the Ld. CIT(A) that assessee in order to buy peace of mind by avoiding litigation offered commission income @ 8% of the total turnover. At the 4 Shri Siddiq Sattar Rawani same time the assessee has also carried out a contract job of Rs.10,52,629/- of M/s. Rayh Healthcare Pvt. Ltd. and offered the same for taxation, which the AO has added to the total income of the assessee for taxation purpose.
Before the Ld. CIT(A) assessee pleaded that on the basis of his net income declared at the rate of 2.5% in the preceding years addition on the total turnover be restricted to 2.5% of the total turnover. Both AO as well as Ld. CIT(A) proceeded to make addition @ 8% of total turnover of Rs.1,12,15,138/- on the basis of request made by the assessee. We are of the considered view that when the assessee has not got his books of accounts audited and achieving the turnover of Rs.1,12,15,138/- is not in dispute and no evidence has been brought on record during assessment proceedings, appellate proceedings as well as remand proceedings that net profit @ 8% is very high, we find no illegality or perversity in the impugned findings returned by Ld. CIT(A). Hence, ground No.1 is decided against the assessee.
Ground No.2 8. Assessee claimed expenditure of Rs.88,824/-. The Ld. CIT(A) upheld the disallowance of expenditure claimed by the assessee on the ground that determination of net commission income has been carried out after taking into consideration all the expenses. When the net commission income of the assessee has been estimated at 8% separate deduction qua expenditure claimed is not admissible as per our findings on ground No.1. So we find no illegality or perversity in the impugned findings returned by Ld. CIT(A). Hence, ground No.2 is decided against the assessee.
Ground No.3 9. Next ground is AO made the addition of Rs.10,52,629/- on the contract amount as income which has been upheld by the Ld. CIT(A). Assessee challenged the same on the ground that it should be taxed @ 8% of the contract amount under section 44AD of the Act. The Ld. CIT(A) decided this issue by extending the relief of Rs.52,629/- on estimation basis. The relevant part of the findings of the Ld. CIT(A) is reproduced as under: “8.3. On perusal of above stated facts, observations of the AO in the assessment order, remand report of the AO & repIy to remand report, it is seen that, the appellant has not offered the aforesaid amount received from M/s.Rayh Healthcare Pvt. Ltd. in the return of income, the AR of the appellant and appellant have agreed for addition, vide letter dtd. 26.12.2016, the appellant has also failed to produce the details of expenses incurred against the receipt. However, the AR of the appellant has filed form 26AS to proof that, he had carried out contract work for M/s. Rayh Healthcare Pvt. Ltd. and TDS has also been deducted. The appellant has also filed confirmation from M/s. Rayh Healthcare Pvt. Ltd. regarding export packing and dispatch contract carried out by the appellant. The AR of the appellant has further stated that, the appellant had to pay remuneration to the labourers and other misc expenses e.g. food, conveyance etc. Therefore, the AR of the appellant has requested to estimate @ 8% of Rs.10,52,629/- u/s.44AD of the Act. Considering the above stated facts of the case, I restrict the addition to the extent of Rs.10,00,000/- as against the addition of Rs.10,52,629/- and the same is added to the total income of the appellant. The appellant gets relief of Rs.52,629/- i.e. (10,52,629 - 10,00,000). The appeal of the appellant is partly allowed.”
Bare perusal of the aforesaid findings returned by the Ld. CIT(A) goes to prove that the Ld. CIT(A) proceeded on the basis of conjectures and surmises without taking into account the contention raised by the assessee that this amount has been received by the assessee to carry out the work of M/s. Rayh Healthcare Pvt. Ltd. and TDS has been deducted and confirmation from M/s. Rayh Healthcare Pvt. Ltd. regarding export, packing and discharge 6 Shri Siddiq Sattar Rawani contract carried out by the assessee has also been filed. It is also case of the assessee that out of the amount received the assessee had to pay remuneration to the laboratories and other miscellaneous expenses like food, conveyance etc. In these circumstances, we are of the considered view that Ld. CIT(A) has erred in estimating the relief given to the assessee without going into the merits of this contention.
When Ld. Lower Revenue Authority has otherwise proceeded under section 44AD of the Act by estimating the net profit @ 8%, the other receipts of the assessee are also entitled to get its net profit estimated @ 8% of Rs.10,52,629/- under section 44AD of the Act. So this ground is determined in favour of the assessee.
In view of what has been discussed above, AO is directed to calculate 8% as net profit on the amount of Rs.10,52,629/- under section 44AD of the Act. Resultantly, appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 04.08.2022.