CHANCHAL MITRA,SILIGURI, DARJEELING vs. A.O., WARD 1.1, SILIGURI

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ITA 2185/KOL/2024Status: DisposedITAT Kolkata15 January 2025AY 2022-20234 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the order of the Ld. CIT(A) upholding the Ld. AO's addition could not be sustained. The Tribunal noted that the assessee was engaged in the business of purchase and sale of liquor, with purchases from the state government corporation amounting to ₹12,70,62,216/- and total sales of ₹12,96,75,358/-. Additionally, commission and brokerage income of ₹12,88,637/- was reported. The Ld. AO aggregated these amounts to ₹1,37,27,832/- and applied a 10% net profit, resulting in an estimated profit of ₹1,30,72,783/-. The Tribunal observed that the assessee's net profit margin historically ranged from 2.24% to 2.82% in previous assessment years, with a net profit of 2.40% in the preceding year. The judgment explicitly states that for best judgment assessment, the AO must rely on comparable cases, not conjecture. The Tribunal found that the Ld. CIT(A) overlooked the facts on record. Therefore, the Tribunal set aside the order of the Ld. CIT(A) and directed the Ld. AO to delete the addition. The appeal of the assessee was allowed.

What were the facts?

The assessee, Chanchal Mitra, is appealing an order dated 03.09.2024 by the National Faceless Appeal Centre, Delhi (Ld. CIT(A)) for Assessment Year 2022-23. The appeal challenges the addition of ₹1,03,22,032/- made by the Income Tax Officer (Ld. AO) by applying a 10% profit rate on gross receipts after rejecting the assessee's books of accounts under Section 143(3) of the Income Tax Act. The assessee, engaged in the business of purchase and sale of liquor, filed a return declaring ₹29,84,710/-. The case was selected for scrutiny due to no income from TCS receipts. The assessee purchased liquor worth ₹12,70,62,216/- from West Bengal State Beverages Corporation Limited. The Ld. AO estimated income by applying 10% on total receipts of ₹13,06,91,832/-, resulting in an estimated profit of ₹1,30,72,783/-. The Ld. CIT(A) upheld the addition after the assessee failed to respond to notices.

What were the issues?

1. Whether the addition of ₹1,03,22,032/- made by the Ld. AO by applying a 10% profit rate on gross receipts, after rejecting the assessee's books of accounts under Section 143(3) of the Income Tax Act, is justified? Assessee's Contentions: The assessee argued that the Ld. AO had access to audited financial statements, including the balance sheet and profit and loss account, which showed total turnover of ₹12,96,75,358/- and commission/brokerage income of ₹3,01,337/-, and miscellaneous receipts of ₹7,15,137/-. The assessee also presented a comparative chart of Gross Profit and Net Profit percentages for various assessment years (2019-20 to 2023-24), indicating net profit margins ranging from 2.24% to 2.926%. The assessee contended that the Ld. AO's estimation of 10% profit was based on conjecture and surmises, not comparable cases. Revenue's Contentions: The revenue, through the Ld. DR, did not explicitly present arguments in the judgment. The judgment notes that the assessee failed to respond to various dates given in the appellate proceedings, and the Ld. CIT(A) upheld the Ld. AO's order.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM

For Appellant: Shri S.K. Tulsiyan, AR
For Respondent: Shri Gautam Patra, DR
Hearing: 01.01.2025

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 03.09.2024 for the AY 2022-23.

2.

The only issue raised in the various grounds of appeal is against the confirmation of addition by ld. CIT (A) of ₹1,03,22,032/- as made by the ld. AO by applying 10% on the gross receipt after rejecting the books of accounts u/s 143(3) of the Act.

3.

The facts in brief are that the assessee filed his return of income on 29.09.222, declaring total income at ₹29,84710/-. The case of the assessee was selected under Computer Assisted Scrutiny Selection (CASS), on account of no income from TCS receipts (liquor). The facts

4.

In the appellate proceedings also the ld. CIT (A) after condoning the delay in filing the appeal upheld the order of the ld. AO when the assessee failed to respond various dates given in the appellate proceedings. The ld. CIT (A) held that the ld. AO has rightly assessed the income of rightly made the addition of ₹103,38,192/- by applying at the rate of 10%.

5.

After hearing the rival contentions and perusing the materials available on record, we find that the assessee is undisputedly carrying the business of purchase and sale of liquor. The purchase of liquor is control item and subject to TCS during the year the assessee purchase

A.Y. Total receipts Gross profit Gross profit% Net Profit Net profit% 2019-20 8,55,51,294 34,02,054 3.977% 2418905 2.827% 2020-21 8,20,12800 14,16,200.83 1.727% 2399394 2.926% 2021-22 10,67,26,890 32,56,050 3.051% 2620395 2.455% 2022-23 13,06,91,832 8,94,003 2.980% 3241878 2.481% 2023-24 15,2293,950 52,37,053 3.227% 3648341 2.248% 06. Thus, we note that all the information available before the ld. AO and even in order to make the best judgment assessment the AO has to find out the comparable case and as to base his conclusion on the comparable cases and not based on the views and findings of conjuncture and surmises. Therefore, the order passed by the ld. CIT (A) upheld the order of the ld. AO cannot be sustained. We note that

7.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 15.01.2025.

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