ITO, WARD-2(2), BHUBANESWAR vs. SMT. SAROJ SARAOGI, BHUBANESWAR

आयकर अपील�य अ�धकरण, कटक �यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PAVAN KUMAR GADALE, JM आयकर अपील सं./ITA No.448/CTK/2017 (�नधा�रण वष� / Assessment Year :2014-2015) ITO, Ward-2(2), Bhubaneswar Vs. Smt. Saroj Saraogi, Prop.: M/s Shivam Traders, C/o Sri Surendra Agarwala, 3r d Floor, 304, Bhagwan Tower, Cuttack Road, Laxmisagar, Bhubaneswar-751006 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : APZPS 9464 A (अपीलाथ� /Appellant) (��यथ� / Respondent) .. �नधा�रती क� ओर से /Assessee by : Shri D.K.Pradhan, DR राज�व क� ओर से /Revenue by : Shri P.R.Mohanty/Surendra Agarwal, AR सुनवाई क� तार�ख / Date of Hearing : 05/07/2018 घोषणा क� तार�ख/Date of Pronouncement 05/07/2018 आदेश / O R D E R Per Shri Pavan Kumar Gadale, JM: This is an appeal filed by the Revenue against the order of CIT(A)- 1, Bhubaneswar, for the assessment year 2014-2015, in the matter of order passed u/s.143(3) of I.T.Act. 2. The Revenue has raised the following grounds of appeal :- 1. The order of the Ld. CIT(A) is erroneous on facts and in law. 2. The Ld. CIT(A)' is not justified in deleting the addition of Rs.2,44,57,504/- made by AO in the assessment by the way of estimating of profit at the rate of 9% of the gross sales of assessee's Koraput Branch as against 4.01% declared by the assessee, when the assessee has not been able to explain properly the reason for lower profit in his Koraput Branch when compared to his Dhenkanal Branch(8.96%) for the financial year 2013-14 relevant to the A.Y. 2014-15. 3. On the facts and circumstances of the case and particularly for the reason of failure on part of the assessee to furnish full particulars of the customers to whom she has made sales on wholesale basis and the failure to produced bills and vouchers

2 ITA No.448/CTK/2017 in that regard, as pointed out by the AO in point No. (x) at page No.3 of the assessment order, the Ld. CIT(A) is not justified in deleting the entire addition of Rs.2,44,57,504/- made in the assessment in this case. 4. The appellant craves to alter, amend or add any other ground that may be considered necessary in course of the appeal proceedings.

derives income from wholesale trade of GCI Sheets, MS Rod, AC Sheet

and Cement and filed the return of income electronically on 29.11.2014

for the assessment year 2014-2015 with total income of Rs.14,22,960/-.

Subsequently, the case was selected for scrutiny under CASS and

notices u/s.143(2) and 142(1) of the Act were issued to the assessee. In

compliance the AR of the assessee appeared from time to time and the

case was discussed. The AO completed the assessment u/s.143(3) of the

Act after making addition of Rs.2,25,12,376/- on account of estimating 9%

of turnover in respect of Koraput Branch as gross profit and assessed

total income of Rs.2,58,80,460/- and passed order dated 30.12.2016.

reiterated the submissions made before the AO. Ld. CIT(A) having

considered the submissions of the assessee and findings of AO has

allowed the appeal of the assessee.

Tribunal.

granted substantial relief and further ld. DR submitted that the assessee

has not filed any details but filed the explanations before the CIT(A) and

3 ITA No.448/CTK/2017 no information was filed before lower authorities, therefore, prayed for

allowing the appeal of Revenue.

that the information was submitted with the AO in the assessment

proceedings and the assessee already substantiated with evidence and

submitted that the CIT(A) has considered the submissions and facts as

well as genuineness of the transactions and deleted the addition.

record. We find that as per the observation of the AO the assessee has

shown gross profit percentage of M/s Shivam Traders, Dhenkanal at

8.96% and at Koraput Branch it is 4.01%, therefore, the AO did not accept

the lower percentage of gross profit in respect of M/s Shivam Traders,

Koraput as the assessee’s nature of business at Koraput is not different

from its business at Dhenkanal and accordingly the AO estimated the

profit from the Koraput Branch of the assessee at a higher rate of 9% as

against 4.01% disclosed in the accounts. On appeal, the CIT(A) observed

that the books of account have been properly maintained by the assessee

which is clear from the assessment order itself wherein there is not even a

whisper as regards the defects in the books of account. Further the CIT(A)

observed that without rejecting the book result under the provisions of

section 145 of the Act, the AO cannot estimate the profit from the

business. The observations of the CIT(A) are read as under :- “5. I have considered the matter. The AO has estimated the profit from the Koraput branch of the assessee at a higher rate of 9% as against 4.01% disclosed in the accounts. The reason for this is that the assessee has not produced any evidence that its

4 ITA No.448/CTK/2017 Koraput branch is involved in wholesale trading where the rate of profit will be less. The AO has also referred to the audit report where the nature of business of the assessee has been mentioned as 'wholesale trade'. The AO is apparently not satisfied with the rate of profit in wholesale trading disclosed at 4.01% as against the rate of profit of 8.96% disclosed for assessee's Dhenkanal branch which is involved in retail trading. The AO is of the view that the profit rate in both the branches should have been disclosed at the same rate. The AO has also mentioned that no evidence the assessee could furnish to show that its Dhenkanal branch is involved in retail trading whereas the Koraput branch is involved in wholesale trading. On perusal of the facts on record, the suspicion of, the AO appears to be.clearly misplaced and misguided. The assessee has been doing business since long and its Koraput branch is always involved in wholesale trading disclosing a lesser margin of profit. From the records of the earlier years, this fact is clearly evident. Moreover, from the very quantum of turnover, the claim of the assessee that its Koraput branch is involved in wholesale trading is crystal clear. The gross sale of Dhenkanal branch during the relevant FY is Rs.3,75,58,673/- whereas the total sale of Koraput branch is Rs,45,13,85,626/-. In a retail trading of grocery, achieving a turnover of more than Rs.45 crores, that too in a backward district like Koraput, is well nigh impossible. Moreover, the assessee's is a case where proper books of account have been maintained which have been subjected to tax audit u/s.44AB. That books of account have been properly maintained by the assessee is clear from the assessment order itself wherein there is not even a whisper as regards the defects in the books of account. Without rejecting the book result under the provisions of section 145, the AO cannot estimate the profit from the business as has been done in this case. Disclosure of less profit from a particular branch may justifiably arouse suspicion in the minds of the AO but suspicion however strong cannot take the place of evidence. On the basis suspicion alone, to estimate the profit at 9% as against 4.01%disclosed in the accounts is highly unjustified, highhanded and arbitrary. The same cannot at all be sustained. The AO should have done well to reject the books of account if defects were there in the same and only thereafter could have estimated the profit at a reasonable rate. Before making such a huge addition of more than Rs.2 crores, the AO should have been more careful. The carelessness of the AO is also evident from the fact that after quantifying the addition at Rs.2,25,12,376/-, he has added an amount of Rs.2,44,57,504/- in the computation of income. The action of the AO is not sustainable in the eye of law so far as estimation of profit of Koraput branch is concerned. Hence, the addition of Rs.2,44,57,504/- is deleted.”

controvert the above findings of the CIT(A) and also could not bring any

5 ITA No.448/CTK/2017 new material facts on record to substantiate that the CIT(A) has erred in allowing the appeal of the assessee. On perusal of the order of the CIT(A), we found that the CIT(A) having considered the business operations and activities of the assessee that the assessee is having two branches at Dhenkanal and Koraput and there is a difference in margin due to disturbances at Koraput. We further found that the CIT(A) having dealt on the issue in para 5 page 6 of the order, has passed a reasoned order accepting the present business circumstances of the assessee and also ld. CIT(A) has dealt on the findings of AO and submissions of the assessee and took a rational view, which according to us, is acceptable. Therefore, we are not inclined to interfere with the order of CIT(A) and we uphold the same and dismiss the grounds of appeal of the Revenue. 10. In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on this 05/07/ 2018. Sd/- Sd/- (N.S.SAINI) (PAVAN KUMAR GADALE) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य / JUDICIAL MEMBER कटक Cuttack; �दनांक Dated 05/07/2018 �.कु.�म/PKM, Senior Private Secretary आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant- 1. ITO, Ward-2(2), Bhubaneswar ��यथ� / The Respondent- 2. Smt. Saroj Saraogi, Prop.: M/s Shivam Traders, C/o Sri Surendra Agarwala, 3 rd Floor, 304, Bhagwan Tower, Cuttack Road, Laxmisagar, Bhubaneswar-751006 आयकर आयु�त(अपील) / The CIT(A), 3. आदेशानुसार/ BY ORDER, आयकर आयु�त / CIT 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कटक / DR, ITAT, Cuttack 5. गाड� फाईल / Guard file. 6. (Senior Private Secretary) स�या�पत ��त //True Copy// आयकर अपील�य अ�धकरण, कटक / ITAT, Cuttack