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Income Tax Appellate Tribunal, “B’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
Appellant Respondent Assessment Year 4/Bang/2020 DCIT, Smt. Shamshad Begum, 2010-11 Central Circle – 1, Prop. M/s. Puttur Supari Mangaluru. Industries, Kemmai, Near Vishnumurthy Temple, Puttur. PAN : AFSPB 2509 Q 69/Bang/2020 Shri. Sajid Samran, DCIT, 2016-17 Prop. M/s. Supreme Supari Central Circle – 1, Trading Company, Mangaluru. 20-1-18/1, Azzizuddin Road, Bunder, Mangaluru – 575 001. PAN : EIIPS 5922 P 90/Bang/2020 DCIT, Shri. Sajid Samran, 2016-17 Central Circle – 1, Prop. M/s. Supreme Supari Mangaluru. Trading Company, Mangaluru – 575 001. PAN : EIIPS 5922 P Revenue by : Shri. Muzaffar Hussain, CIT(DR)(ITAT) Shri. Ramesh Kumar A, Addl. CIT(DR)(ITAT) Assessee by : Smt. Sheetal S. Borkar, Advocate Date of Hearing : 31.03.2021 Date of Pronouncement : 01.04.2021 O R D E R Per Chandra Poojari, Accountant Member:
ITA No.4/Bang/2020 is an appeal by the Revenue. and 90/Bang/2020 are cross appeals.
,69 and 90/Bang/2020 Page 2 of 8 2. ITA No.4/Bang/2020
The Revenue has raised the following grounds:
1. The order of the learned CIT(A) is opposed to law and facts of the case.
2. The CIT(A) has erred in estimating the profit @ 4% on the unrecorded sales without any basis when the assessee had relied on Section 44AD. 3. The CIT(A) erred in not considering the provisions of Section 23 to assess the vacant property which was held during the Financial Year. 4. The CIT(A) erred in considering the intimation u/s 143(1) as an assessment order. 5. The CIT(A) erred in deleting the addition on account of unexplained cash credits after recording the finding that no evidences were produced by the appellant. 6. The CIT(A) erred in applying the decision in the case of CIT Vs. Balbir Singh Maini though the Joint Development Agreement has been registered with the Sub Registrar, Mangalore Taluk. 7. The CIT(A) erred in holding that the provisions of section 45(5A) were curative in nature and would apply retrospectively. 8. The CIT(A) has erred in holding that the case falls outside the purview of Section 153A without taking note of the decision of the Karnataka High Court in the case of M/ s GMR Energy Limited in of 2018. 9. For these and other grounds that may be urged upon, the order of the CIT(A) may be reversed and that assessment order to be restored.
After hearing both the parties, we are of the opinion that there was an appeal by the assessee in this case for the same Assessment Year against the same impugned order before this Tribunal in to 61/Bang/2020 and others dated 16.10.2020, wherein the Assessment Order was quashed by observing as follows:
“5. Now we reproduce para 5 from page 14 of the Tribunal order rendered in the case of Mr. M. A. Siddique Vs. DCIT (supra). This para reads as under: “5. We have considered the rival submissions. We find that in these two paras, learned CIT (A) has noted several judicial pronouncements cited by the learned AR of the assessee before him ,69 and 90/Bang/2020 Page 3 of 8 and have given a categorical finding that the case of assessee squarely falls outside the purview of section 153A because the assessment has not abated and no new material was found or unearthed during the course of search and hence, these judgments are squarely applicable. These findings of C1T (A) are in favour of the assessee and the same have attained finality because no appeal is filed by the revenue against these findings of CIT (A). But in spite of this finding in para 6 of his order, the learned CIT (A) has held in para 7 of his order that the appeal of the assessee for A. Y. 2012 — 13 is partly allowed. In our considered opinion, after holding this in para 6 that the case of assessee squarely falls outside the purview of section 153A, learned CIT (A) should have held that the assessment order passed by the AO u/s 153A is bad, in law and he should have allowed the appeal of the assessee instead of holding that the appeal is partly allowed. Therefore, we hold that the assessment order passed by the AO u/s 153A is bad in law and therefore, other grounds regarding merit of various addition are academic and no adjudication is called for about those grounds.”
We find that in the facts of the present case, this Tribunal order is squarely applicable and hence, respectfully following this Tribunal order, we hold that in the present case also, the Assessment Order passed by the AO under section 153A for Assessment Years 2010-11 and 2011-12 are bad in law and therefore, other grounds regarding merits of various additions in these two years are academic and no adjudication is called for about those grounds in these two years.”
Being so, the appeal filed by Department is infructuous and accordingly dismissed
These are cross appeals. In this cross appeals, the Revenue raised the following grounds:
1. The order of the Ld.CIT(A) is opposed to law and facts of the case.
2. The CIT(A) erred in not considering the basis on which the profit was estimated at 12% by the AO. 3. The CIT(A) erred in ignoring the finding given by the AO in paras 4.4 86 4.5 of her order that the assessee had himself disclosed profit @ 10% of turnover u/s 44AD of the Act in his return of income and the profit on ,69 and 90/Bang/2020 Page 4 of 8 account of undisclosed sales is to be assessed at a higher rate as the assessee would be saving on Sales Tax 86 Commission payable on such unaccounted sales.
4. The CIT(A) erred in holding that the gross profit is to be taken on the net amount of sales and purchases.
5. The CIT(A) erred in not upholding the addition on account of investment in unaccounted purchases.
6. The CIT(A) erred in not upholding the addition on account of receivables.
7. The CIT(A) has failed to appreciate the fact that in the absence of regular books of accounts the sales, purchases, receivables and creditors cannot be interlinked as there are no corroborative evidences to substantiate the co-relation of transactions.
8. For these and other grounds that may be urged upon the order of CIT(A) may be reversed and that assessment order to be restored.
6. The grounds are interrelated. The facts of the case are that the assessee is an individual and is carrying on the business of trading in arecanutunder in the name and style ‘Supreme Supari Trading Company, Bunder, Mangaluru. The assessee filed return of income for the assessment year 2016-2017 on 24.5.2017, declaring a total taxable income of Rs.14,11,400/-.
7. There was a search and seizure operation under section 132 conducted at the residential premises of the Appellant on 24.11.2015 atSupreme Cottage D'Silva Lane, High Land, Mangaluru and at M/s.Supreme Supari Trading Co., Azzizuddin Road, Mangaluru, 20-1-713, Sabeena Complex, Azzizuddin Road, Bunder, Mangaluru. Also, there was a survey under section 133A was also conducted on 24.11.2015 at various business premises of the appellant and his family at Zaheer Towers, Rao & Rao Circle, Mangaluru, at M/s. Supreme Supari Trading Co. and Supreme Supari Traders at Bandhukia Building, ItwariMashkasath, Nagpur and Puttur Supari Industries, Puttur..
8. Subsequently, the case was selected for scrutiny and notices u/s. 143(2) and 142(1) were issued calling for details. Finally assessment was concluded u/s.143(3), vide order dated 29.12.2017. In the order assessment, the AO has made following additions and thereby raised demand of Rs.1,11,42,324/-. ,69 and 90/Bang/2020 Page 5 of 8 1. Profit estimated on unrecorded sales 56,24,892 2. Unexplained investment in purchases 1,38,58.470 3. Unexplained assets — receivables 38.97.934 4. Unexplained cash credits u/s.68 7.41.126 TOTAL ADDITIONS 2.41,22,422
9. The CIT(A) observed on these issues as follows:
5.14 I have considered the facts of the case and case laws relied on by the AR regarding loose sheet, dairy unearthed during search/survey, the ratio laid down in the said cases are not applicable on the basis of facts and circumstances of the appellant's case. However, I fully agree with the fact that, sales and purchases should be net off and further also give effect to other direct and indirect expenses. Turnover includes purchase cost, labour cost and gross profit. Only gross profit can be termed as income of the appellant. The action of the Assessing Officer in adding entire turnover is useless Therefore, the profit to be computed as follows. Particulars Gross Additions made Additions ought Amount by the AO to have been @ Rs. Rs. 4% Rs. A Unrecorded sales 4,68,74,106 56,24,892 B. Undisclosed purchases 1,38,58,470 1,38,58,470 A. Sales (A — B) 3,30,15,636 N.A. 6,60,313 Undisclosed receivables 38,97,934 38,97,934 Not applicable since it is part of sales Undisclosed sundry 7,41,126 7,41,126 Not applicable, since creditors it is part of purchases Thus, profit may be computed @ 4% of Rs.3,30,15,636/-, i.e. Rs.6,60,313/-. Directed accordingly.
10. Now the contention of AR is that the profit estimated on turnover of Rs.3,30,15,636/- @ 4% net profit is very high and it has to be reduced to 2% as held by this Tribunal in the case of Mr. M. A. Siddique in to 66/Bang/2020 dated 17.08.2020. On the other hand, learned DR submitted that ,69 and 90/Bang/2020 Page 6 of 8 the assessee itself accepted the net profit @ 10% in his return of income and the same to be confirmed.
We have heard both the parties and perused the material on record. Admittedly, in these cases, the assessee himself offered the income at 10% in his return of income. The assessee has placed reliance on the judgment of Co- ordinate Bench in the case of Mr. M. A. Siddique cited supra wherein it was held that:
“12. In this year, three issues are raised on merit of various additions. As per Ground No. 2, the grievance is about of addition of Rs. 109,05.178/-made by the AO to the extent of 12% of the alleged undisclosed sales turnover of Rs. 908,76.4857- based on data retrieved from the impounded materials. PC of the assessee's business premises at Nagpur. SMS in the cell phones of the employees of at Nagpur wherein contents were mentioned in coded words and numbers. As per para 5.2.9 of his order in this year, although learned CIT (A) has noted that in the business of Arecanut, the books of accounts disclose profit @ 2 - 3% but while computing income of unaccounted turnover. taxes and levies etc. are evaded and therefore. the profit will be higher and he directed the AO to assess income @ 4% of undisclosed turnover as against 12 % rate adopted by the AO. In the written submissions dated 11.06.2020 filed by the learned AR of the assessee for A. Y. 2015 - 16, this is one of the submissions that the coded words and figures found noted in impounded materials were disclosed in audited books of accounts and therefore, no addition is justified in this regard but no evidence was filed before us in support of this contention and therefore, this argument is rejected. This was an alternative oral argument that having noted that in the business of Arecanut, the books of accounts disclose profit 2 - 3%, learned CIT (A) was not justified in directing the AO to assess income a 4% of undisclosed turnover as against 12 % rate adopted by the AO. It was the submission that it should be 2 % only. We find force in this alternative submission because the only basis adopted by CIT (A) to adopt higher percentage is this that in unaccounted business, taxes and levies etc. are evaded but the taxes i.e. VAT etc. are collected from the customer separately when the bill is issued and it is paid to government. In unaccounted sales, no bill is issued and therefore, no customer will pay taxes and levies which 'c ill result into higher profit to the seller. Therefore, we hold that adopting the profit rate of 2% will meet the ends of justice in ,69 and 90/Bang/2020 Page 7 of 8 the facts of the Present case and we direct the AO accordingly. On this issue, the assessee gets a part relief. Ground No. 2 is partly allowed.” 12. In our opinion, there was no admission by that assessee like in the present case. Being so, it is appropriate to estimate the income of the asesssee on the basis of assessee’s past income. The assessee furnished before us the past history of income as follows:
DETAILS OF LAST 3 YEARS INCOME STATEMENT SL. F.Y A.Y TURNOVER EXPESNES INCOME U/S. U/S. PERCENTAGE NO. 44AD 44AB OF NET PROFIT 1 12-13 13-14 19,40,500 17,41,300 1,99,200 YES - 10% 2 13-14 14-15 20,83,200 18,58,967 2,24,233 YES - 8% 3 14-15 15-16 73,64,270 70,55,370 3,08,900 - YES 4%
Accordingly, we direct the AO to consider the average net profit declared by the assessee in the last 3 immediate Assessment Years i.e., 2013-14, 2014- 15, 2015-16 and apply the same rate and recompute the income of the assessee.
Now the other contention of the DR is that there should be separate addition with regard to undisclosed investment in unaccounted purchases against receivables. Since there was no corroborative evidence to substantiate the co-relation of transactions, in our opinion, once the income of the assessee is estimated, there cannot be any further additions. This view of ours is fortified by the judgment of Hon’ble Andhra Pradesh High Court in the case of Indwell Construction Vs. CIT 232 ITR 776. Accordingly, we are inclined to dismiss the other grounds of appeal
raised by the Revenue. ,69 and 90/Bang/2020 Page 8 of 8
15. In the result, assessee’s appeal is dismissed and Revenue’s appeal for Assessment Year 2016-17 is partly allowed for statistical purposes.