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Income Tax Appellate Tribunal, “SMC-A” BENCH, BANGALORE
Before: Shri Chandra Poojari
This appeal filed by the assessee is directed against the order of the CIT(A) dated 23.05.2019. The relevant assessment year is 2015-2016.
The assessee has raised following grounds:-
“1. The learned CIT(A) has erred in confirming the adoption of income from business at Rs.16,79,728/- calculated at the rate of 8% of the Turnover as against income from business returned Rs.5,53,132.00. 1.2 The Assessing Officer having accepted the turnover as per books and having not rejected the books of accounts could not have restored to Net Profit. 1.3 The estimation of the Net Profit as made by the Assessing Officer and as confirmed by the CIT(A) being bad in law and on facts, is to be deleted and the income as returned by the appellant is to be accepted.
2. In any case and without prejudice the adoption of figure at 8% of the turnover is without any basis nor it is supported by any comparable cases and therefore the adoption of profit at 8% of the turnover by the Assessing Officer and which is confirmed by the CIT(A) is to be deleted and income as per the Books of Accounts is to be accepted.”
The facts of the case are that the assessee is an individual engaged in the business of dealing in computers, mobiles phones and its accessories. For the assessment year under consideration, the assessee has filed her return of income on electronic mode on 30.09.2015 admitting taxable income of RS.5,30,820. The assessee’s case was selected for scrutiny and the A.O. passed an assessment order ex parte u/s 144 of the I.T.Act on 28.12.2017 determining the taxable income at Rs.42,09,770, wherein he has made the following adjustments:-
Particulars Amount in (Rs.) Amount in (Rs.) Income estimated on presumptive 16,79,728 basis at 8% on turnover of Rs.2,09,96,599 as discussed vide para no.6 Disallowance of unsecured loans 7,18,119 u/s 41(1) of the Act as discussed vide para No.7 Disallowance of credits u/s 41(1) of 18,11,919 42,09,768 the Act as discussed vide para No.8 Assessed total income u/s 144 of 42,09,770 the Act.
3.1 For making the above three adjustments, the Assessing Officer has drawn the following conclusions:-
“4) From the above facts of the case, it is observed that the assessee is consistently not responding to this office notices and for this reason, penalty u/s 271(1)(b) has been levied. Inspite of this and also a letter dated 11.12.2017, the assessee failed to furnish complete details and furnish in writing proper reason for not adhering to this office notices, letter. 5) In the above circumstances and since the case was getting time barred, I have no option but to complete the assessment exparte u/e 144 for failure on the part of the assessee for not furnishing complete details. Accordingly, the assessment is completed as under 6) The assessee is mainly dealt in sale of computers, home appliances, mobiles and also in receipt of certain service charges. During the year under consideration, the assessee has shown total turnover from business at Rs.2,09,96,599/- and shown net profit at Rs.5,53,131.67. The assessee has debited expenses under various heads but could not furnish bills/vouchers in support of her claim. In the absence of necessary details, income of the assessee is estimated at 8% on total turnover, which works out to Rs.16,79,728/-. 7) On verification of the Balance Sheet furnished, the assessee has shown unsecured loans to the extent of Rs.7,18,199/-. The details and confirmations were called for vide this office letter dated 11.12.2017 but the assessee failed to furnish the same for verification and in the absence of proof and confirmation, entire unsecured loans shown at Rs.7,19,119/- as liability in the Balance Sheet are disallowed as ceased to be in existence [cessation of liability] as per provisions of section 41(1) of the l.T. Act, 1961, and brought to tax. 8) Similarly, confirmations were called for vide this office letter dated 11.12.2017 in respect of sundry creditors shown at Rs.18,11,919/-. The assessee has failed to furnish the confirmation with necessary ledger extracts. As the liability does not exist and could not be proved by the assessee with evidence, the same is disallowed as per provisions of section 41 (1) of the Act and brought to tax.”
In first appeal, the CIT(A) sustained the addition on estimation of income and deleted the addition made u/s 41(1) of the I.T.Act.
Against this, the assessee is in appeal before the Tribunal.
I have heard the rival submissions and perused the material on record. In this case the assessee has not produced the books of account and vouchers and bills neither before the Assessing Officer nor before the CIT(A), hence, the income of the assessee was estimated at 8% of the total turnover. But it was an admitted fact that the assessee’s turnover is more than Rs.2 crore, subject to Tax Audit u/s 44AB of the I.T.Act. The assessee has furnished Tax Audit Report in Form No.3CD along with Financial Statement, claiming various expenses, duly audited by Chartered Accountants. In my opinion, the assessee has produced the financial statements and balance sheet along with schedules to balance sheet before the Assessing Officer and the A.O. has not at all rejected the books of account, as not reliable. Further, in my opinion, it is appropriate to remit the entire issue in dispute to the files of the Assessing Officer with a direction to the assessee to produce the books of account, bills and vouchers, so as to claim the deductions. It is ordered accordingly.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced on this 13th day of March, 2020.