DCIT CORPORATE CIRCLE-2, MADURAI vs. STANDARD PRESS INDIA PVT LTD, VIRUDHUNAGAR

This appeal by the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)-19, Chennai in dated 28.02.2019. The assessment was framed by the DCIT, Central Circle-2, Madurai for the assessment year 2013-14 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 31.03.2016.

At the outset, it is noticed that this appeal is barred by limitation by 5 days and Revenue has filed condonation petition supported by affidavit. The order of CIT(A) is received on 19.03.2019. The appeal is to be filed before Tribunal on or before 18.05.2019 but actually appeal was filed only on 23.05.2020 thereby there is a delay of 5 days. The Revenue has stated the following reason for not filing within 60 days in its affidavit vide para 3, which reads as under:- “3. It is submitted that due to postal delay, pre occupation of the undersigned in making appearance before ITAT & ITSC proceedings in the pending cases were got delayed 5 days in this office. Hence the delay.”

The only issue in this appeal of Revenue is as regards to the order of CIT(A) deleting the addition made by the AO on account of omission of net profit amounting to Rs.6,06,85,743/- pertaining to branch office of assessee i.e., Mumbai branch and deleting the addition by admitting additional evidence in violation of Rule 46A of the Income Tax Rules, 1962. For this, Revenue has raised following effective ground No.2:- 2. The learned CIT(A) erred in directing the Assessing Officer to delete the addition made on account of omission of net profit amounting to Rs.6,06,85,743/- in the assessment order passed u/s.143(3) of the Income Tax Act, 1961 on 31.03.2016.

Brief facts are that the assessee is engaged in the business of printing in Sivakasi, Tamil Nadu. A search and seizure operation u/s.132 of the Act was conducted by the Income Tax Department in the group cases of Standard Fireworks Pvt. Ltd., on 16.10.2014 and consequently, the assessee being a group concern, a survey u/s.133A of the Act was carried out on the business premises of the assessee on 16.10.2014. The AO noted that the assessee has filed return of income with audited accounts in Form No.3CD and declared net profit of Rs.76,14,663/-. The AO on verification of impounded documents and verification of profit & loss account noted that there is a working copy of the profit & loss account, which was impounded vide ANN/HVR/SPIPL/IMP/ED dated 11.12.2014 being external drive which show further net profit of Rs.6,83,00,406/-. According to AO, as per this impounded material, the assessee has Rs.55,60,215/- as against net profit in the impounded documents of Rs.6,83,00,406/-. The AO accordingly issued show cause notice to the assessee as to why the branch profit of Rs.6,26,79,809/- be not added to the returned income of the assessee i.e., the profit declared in the impounded documents of Rs.6,83,00,406/- minus already declared profit of Rs.55,60,215/-. The AO noted that the assessee has not filed any reconciliation and also noted the submissions made by the assessee that the transactions pertaining to branch office at Mumbai were kept at Mumbai branch. Hence, the AO noted that the assessee could not produce the accounts relating to branch transactions and clear contention that oracle software maintained in the head office did not have details of branch accounts and this position was also confirmed by the oracle data available in the custody of the Department in the impugned documents. Therefore, the AO added this amount of Rs.6,06,85,743/- as suppressed profit not declared in the return of income by observing in para 4.10 as under:- “4.10 From the above discussion, it is proved that the assessee omitted to admit the net profit to the extent of Rs.6,06,85,743/- (i.e. net profit as per oracle software Rs.7,83,00,406 – income admitted in the return of income Rs.76,14,663). All the transactions in the debit side of the Profit & Loss account were verified and found to be correct with statement of accounts in the oracle software at the time of survey. Hence, the omitted net profit of Rs.6,06,85,743/- is added in the income of the assessee.” Aggrieved, assessee came in appeal before the CIT(A).

The CIT(A) after going through the submissions of the assessee and reconciliation statement filed, deleted the addition by observing in paras 5.2 to 5.4 as under:- “5.2 In the P& L A/c for YE 31-3-2013 Net Profit before tax and after tax of Head office Sivakasi is shown at Rs.6,83,00,406 which is the figure as per impounded P & L A/c. In the consolidated P &L A/c Loss of Mumbai Branch (started on 23-10-2012) is admitted at Rs.6,06,85,739. Consolidating both, NP shown in the consolidated P &L A/c is Rs.76,14,663 which is the figure admitted in the ROI vide extract above, filed before Survey. There are separate P & L A/c for Bombay branch (loss at RS.6,08,85,738), Head office Sivakasi (profit at Rs.6,83,00,406) and consolidated P & L of both (NP at Rs.76,14,663) copies of which have all been filed both before AO and at appellate stage. Thus, the NP as per impounded P& L A/c fully tallies with the NP shown against Sivakasi HO.

Before us, Shri AR.V. Sreenivasan, Addl.CIT argued on behalf of Revenue and relied on the assessment order. He stated that the assessee before CIT(A) filed additional evidences i.e., separate profit & loss account maintained by branch office at Mumbai and claimed loss of Rs.6,08,85,738/-. According to him, these were new evidences and hence, requested that if at all these evidences are to be considered for the purpose of reconciliation of profit & loss account, the same may be referred to the file of the AO.

On the other hand, the ld.counsel for the assessee drew our attention to assessee’s paper-book consisting of 1 to 27 pages and stated that the alleged documents referred to by the ld.counsel for the assessee were very much filed before the AO during the course of assessment proceedings and he referred to the letter filed before DCIT dated 24.03.2016, wherein complete reconciliation of sale of paper & board in head office with audited statement and reconciliation of sale in head office, profit & loss account with audited statement were filed. In this reconciliation, ld.counsel showed us the transfer made from branch during the year and considered in the profit & loss account was disclosed. The assessee filed complete sale of paper and board including branch office sale as well as domestic sales and receipts. The ld.counsel for the 5 of the assessee’s paper-book and drew our attention to sales account to tally the figures. Finally, the ld.counsel for the assessee further drew our attention to page 7 of assessee’s paper-book wherein letter dated 26.03.2016 addressed to AO was filed and the relevant consolidation of head office and branch figures were recorded. The relevant para 3 of the letter including the reconciliation reads as under:- “3. On consolidation of Head office & Branch figures, the net profit shall be at Rs.76,14,663/- as stated I audited statement of accounts and return of income filed. The reconciliation of net profit of Rs.6,83,00,406 as per oracle software and net profit of Rs.76,14,663/- as per audited statement of accounts is furnished below for your consideration. PARTICULARS Rs. Rs. Net Profit as per Profit & Loss Account in 68,300,406 Oracle Software (taken during survey) Less: Expenses side of Branch P&L account Branch transfers made during the year as per 54,259,988 P&L Account in Oracle software (taken during survey) Direct Purchases made by the branch as per 28,184,370 Mumbai Branch Profit & Loss Account Indirect Expenses as per Mumbai Branch 12,283,003 94,727,361 Profit & Loss Account (26,426,955) Add: Income side of Branch P&L account Sales made by the branch during the year as 33,557,370 per Mumbai Branch P&L Account Indirect Income/Discount received as per 484,253 34,041,623 Mumbai Branch P&L account Profit to be as per audited statement of 7,614,668 accounts / return of income filed Profit as per audited statement of accounts / 7,614,663 Return of Income filed Difference 5 The ld.counsel for the assessee also stated that these figures were explained to AO vide letter dated 30.03.2016 including the work-in- progress, financial cost, physical stock. In view of the above, the ld.counsel stated that the entire reconciliation and consolidation of both Profit & Loss account are before the AO during the original assessment proceedings and even these were filed before the CIT(A). He contended that nothing new documents were filed.

When these were confronted to ld. Senior DR, he only stated that for verification purpose matter can be referred back to the file of the AO.

After hearing rival contentions and going through the above facts narrated, we find that the assessee has filed complete consolidation of both Profit & Loss account i.e., for head office as well as Mumbai branch. It is clear that there is a loss on Mumbai branch of Rs.6,08,85,738/- and profit of Rs.6,83,00,406/- on head office at Sivakasi. The consolidated figure comes to net profit of Rs.76,14,663/-, which is declared by the assessee. We noted that since the above details were incorporated in the relevant schedules in the audited accounts and return of income is filed much before the survey conducted by the Department u/s.133A of the Act, we

In the result, the appeal filed by the Revenue is dismissed.