Loading judgment…
No AI summary yet for this case.
Before: SHRI A. D. JAIN
This is assessee’s appeal for Assessment Year 2014-15, taking the following effective grounds: “1. Because the estimate of net profit rate @ 5% on turnover even after rejection of books u/s 145(3) is highly excessive on the facts and records of the case. 2. Because comparative results of three years exhibits that the gross profit and net profit rate has ranged maximum to 10% and 1.5% respectively, the declined net profit rate in the year under appeal was as a consequence of increased sales.
ITA No. 291/Agr/2018 2
Because the appellant had not imported any newspaper during the year under reference, the presumption of CIT(A) that the appellant would have got benefit of 5% on newspaper imported, is without any evidence/information on the records of the case. His action in confirming the application of net profit rate of 5% is therefore unwarranted and unsubstantiated. 4. Because the addition of Rs.38,46,488/- confirmed in appeal by CIT(A) deserves to be modified on the facts in accordance with judicial precedence.” 2. ln this case, assessment has been completed u/s 143(3) vide order dated 23-12-2016 determining the assessed income at Rs.44,76,770/- as against the returned income of Rs.6,30,085/-. The sole addition of Rs. 38,46,688/- to the appellant's returned income has been made by the A.O. after the appellant failed to produce the books of account of his newspaper-printing business, which he runs in the name and style of two proprietorship concerns named M/s Data Sandesh and M/s Dainik Data Sandesh. The books of account of the appellant were rejected by the A.O. and net profit of the business concerns was estimated by him @5% of the sales.
The Ld. CIT(A) confirmed the assessment order by holding as follows:
ITA No. 291/Agr/2018 3
“8.1 I find that the appellant is in the business of printing newspapers and his major sources of income in his two proprietorship concerns is from newspaper sales and advertising revenues. The consolidated net profit declared by him from the two concerns is 0.7% as compared to 1.5% and 0.99% in the immediately two preceding years. 8.2 It is admitted and undisputed that the appellant has failed to produce his books of account and bills and vouchers before the A.O. No reason for this failure has been given by him. Also, when he was asked by me to do so vide order sheet entry dated 24.10.2017, adjournment was sought by the A.R. and neither the books nor the bills and vouchers have been produced by him till date. It was however confirmed by the A.R. vide order sheet entry dated 24.10.2017 that the said books of account exist. Again, no reason for non-production of the same has been given by the appellant or his A.R. Neither any averment has been made by him that the books of accounts were stolen, lost or destroyed. The meager compliance made by the appellant during the assessment proceedings or the submission of the audit reports of the two proprietorship concerns, in my view, is not sufficient to make an inference that the said books are complete and correct. Hence, I am more than convinced that provisions of section 145(3} have been legally and appropriately applied by the A.O. in this case. 8.3 As regards the reasonability of estimate of net profit from the newspaper printing business, it is seen that though the appellant has relied on the book results of the immediately preceding two years and also cited certain judicial precedents in this regard, it is worth noting that the appellant's accounts of none of those years were put to scrutiny under the provisions of section 143(3). The existence of the books of account and their reliability has not been tested and certainly cannot be assumed, particularly when during the impugned year, the appellant has simply refused to produce the bills and vouchers or the books of account for examination.
ITA No. 291/Agr/2018 4
Another important fact that is relevant to note in this context is that the appellant is registered with the Registrar of Newspapers for India (RNI), which functions under the Government of India. As per the official website of RNI, the Publisher/Owner of the news paper/periodical registered with the RNI has to submit five documents for authentication of self- declaration certificate for import of newsprint and a self-attested copy of the annual statement is one of those five documents. It is strange that the appellant is wary of producing the annual statement to the income Tax office and the only inference that can be made from it is that there is something absolutely wrong and illegal which at all cost, is being shielded from examination by the Income Tax Department. It may be relevant to note that in the audit reports of the two proprietorship concerns, the Auditor has listed six registers/books of account which were being maintained by the appellant and he has also certified that he has examined those. Here, it may be useful to take into account the fact that each entity registered under the RNI gets a 5% concession in import duty leviable on its newspaper import. Hence, the net profit below 1% is certainly, not acceptable. Neither the A.O. nor the appellant has brought on record any comparable case. Hence, considering the peculiar facts of this case, I am inclined to accept that A.O.'s estimate of 5% on turnover. One important point to note in this context is that the advertising revenue in the trading account of the M/s Data Sandesh is stated on net basis and not gross basis and hence the actual gross advertising revenue of the appellant would be more than the one included in the turnover adopted by the A.O. for the computation of net profit %. The addition of Rs.38,46,688/- made by him to the appellant's returned Income, is accordingly confirmed. Ground no. 1 and additional ground of appeal are dismissed.”
ITA No. 291/Agr/2018 5
Apropos the CIT(A)’s observation that the assessee did not 4. furnish the self attested copy of the annual statement regarding import of newsprint, the assessee has placed on record before this Bench, a copy of such annual statement in respect of the newspaper Data Sandesh, for the period ending 31.03.2014. A copy thereof is at APB – 7 to 15. This annual statement is stated to have been furnished by the assessee before the Registrar of Newspapers in India. It has been contended that since no query was raised by the ld. CIT(A) in this regard, there was no occasion for the assessee to file this statement before him. It has been pointed out that as per this report, the assessee has not made any import of newsprint during the year.
It is seen that the above annual report goes to the very root of the matter. The order under appeal does not show any query having been raised to the assessee by the ld. CIT(A) in this regard. Therefore, there was no occasion for the assessee to submit this report before the ld. CIT(A). As such, this report is admitted in evidence, since the outcome of the dispute at hand would depend
ITA No. 291/Agr/2018 6
on it. The matter is remitted to the file of the AO, to be decided
afresh in accordance with law, on considering this report, after
affording due and adequate opportunity of hearing to the assessee.
The assessee, no doubt, shall cooperate in the fresh proceedings
before the AO. All pleas available under the law shall remain so
available to the assessee. Ordered accordingly.
In view of the above, for statistical purposes, the appeal is
treated as allowed.
(Order pronounced in the open court on 09/10/2018)
Sd/- (A.D. Jain) Judicial member
Dated: 09/10/2018 Aks –
Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Assistant Registrar Income Tax Appellate Tribunal Agra Bench, Agra
ITA No. 291/Agr/2018 7
Date 1. Draft dictated / (DNS) 09.10.2018 PS 2. Draft placed before author 09.10.2018 PS 3. Draft proposed & placed before the second member JM/AM 4. Draft discussed/approved by Second Member. JM/AM 5. Approved Draft comes to the Sr.PS/PS PS/PS 6. Kept for pronouncement on PS 7. File sent to the Bench Clerk PS 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk. 10. Date of dispatch of Order.