SAILA BEHARI CHAKRAVORTY,KOLKATA vs. I.T.O.,WARD-3(2), KOLKATA

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ITA 300/KOL/2019Status: DisposedITAT Kolkata21 October 2022AY 2011-125 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that in cases of undisclosed sales, only the profit element should be taxed, not the entire sale value, following the Gujarat High Court's precedent. The addition was restricted to 10% of the undisclosed sales.

What were the facts?

The assessee declared income from contract business and pension. After re-opening, assessment was framed under Section 144, leading to an addition for undisclosed sales. The assessee appealed, arguing that only net profit, not gross sales, should be taxed.

What were the issues?

Whether the entire amount of undisclosed sales or only the net profit on such sales is to be taxed as income.

Which sections of the Income-tax Act were involved?

Section 144,Section 148,Section 44AD,Section 250

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Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA

Before: DR. MANISH BORAD & SONJOY SARMA

order

: October 21st, 2022 आदेश ORDER

Per Manish Borad, Accountant Member:

1.

This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2011-12 is directed against the I.T.A. No.: 300/Kol/2019 Assessment Year: 2011-12 Saila Behari Chakravorty. order passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals), Burdwan [in short ld. “CIT(A)”] dated 24.12.2018 which is arising out of the assessment order framed u/s 144 of the Act dated 31.03.2015.

2.

The assessee is in appeal before this Tribunal raising the following grounds: “

1. That the Ld. CIT (A) erred in law and on fact in confirming the addition of Rs.46,35,094/- gross contract value/turnover as undisclosed income instead of net profit on such turnover/contract value. The action of the Ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. It is well settled that in case of undisclosed sales, entire sales could not be taxed as income; reasonable profit on such sales could be taken as income.

2. That the appellant craves leave to raise any other ground or grounds at the time of hearing of the appeal.”

3. Brief facts of the case are that the assessee is an individual earning income from contract business and pension. Income of Rs. 5,93,421/- declared in the return filed on 18.03.2012 for AY 2011-

12. After the case being re-opened by issuance of notice u/s 148 of the Act, the assessee failed to appear and thus, assessment u/s 144 of the Act was framed and addition of Rs. 46,35,094/- was made for undisclosed sales of Rs. 50,54,614/- was made which included the addition for undisclosed sales. The assessee carried the matter before ld. CIT(A) but partly succeeded.

4. Now, the assessee in appeal before this Tribunal solely on the issue of addition for undisclosed sales at Rs. 46,35,094/-. Ld. Counsel for the assessee submitted that ld. CIT(A) erred in confirming the addition for undisclosed sales and the assessee I.T.A. No.: 300/Kol/2019 Assessment Year: 2011-12 Saila Behari Chakravorty. ought to have been made liable for tax on the net profit on such turnover/contract amount.

5.

Per contra, ld. D/R vehemently argued supporting the orders of both the lower authorities.

6.

We have heard rival contentions and perused the records placed before us. The only point of dispute is with regard to the undisclosed sales of Rs. 46,35,094/- which appeared in the Form 26AS but the assessee did not disclose the same in his books of account for AY 2011-12. In the assessment order, ld. AO has observed that the assessee has filed the return offering the business income on presumptive basis u/s 44AD of the Act applying 8% on the gross receipts. The alleged sum is undisputedly the undisclosed sales of the assessee. Now, whether the assessee should be liable to tax on the sale amount or on the profit element in the sale amount. Hon’ble Gujarat High Court in the case of Commissioner of Income-tax vs. President Industries reported in [2002] 258 ITR 654 (Gujarat) order dated 20.04.1999 has held that “The sales only represent the price received by the seller of the goods for the acquisition of which it has incurred the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that the investment by way of incurring cost in acquiring goods which have been sold has been made by the assessee and that has also not been disclosed, the question whether entire sum of undisclosed sales proceeds can be treated as income of the relevant assessment year answers by itself in negative.”

I.T.A. No.: 300/Kol/2019 Assessment Year: 2011-12 Saila Behari Chakravorty.

7.

In light of the ratio laid down by the Hon’ble Gujarat High Court in the case of President Industries (Supra) we find that the same is squarely applicable on the facts of the instant case and there is no finding about the unexplained purchases as the only finding is that there are undisclosed sales and since there has to be a cost of the goods which would first have been purchased and then have been sold only the profit element needs to be subject to tax. Since the assessee has opted for presumptive taxation and offered the income/profit @ 8% of the gross receipt, keeping into the fact that the assessee failed to disclose the considerable amount of sales in its income tax return, we direct ld. AO to calculate the profit @ 10% to replace the addition of undisclosed sales with 10% of the undisclosed sales i.e. Rs. 4,63,510/-. Therefore, we sustain the addition at Rs. 4,63,510/- and partly allow the ground raised

by the assessee.

8. In the result, the appeal filed by the assessee is partly allowed. Kolkata, the 21st October, 2022. Sd/- Sd/- [Sonjoy Sarma] [Manish Borad] Judicial Member Accountant Member Dated: 21.10.2022 Bidhan (P.S.)

I.T.A. No.: 300/Kol/2019 Assessment Year: 2011-12 Saila Behari Chakravorty. Copy of the order forwarded to:

1. 1. Saila Behari Chakravorty, Flat No. J/11, Cluster-13, Purbachal Housing Estate, Saltlake, Kolkata-700 057.

2. ITO, Ward-3(2), Kolkata. 3. CIT(A)-Burdwan. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata.

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