GOPAL CHANDRA MANNA,MEDINIPUR vs. PCIT-9, KOLKATA

Per Shri P.M. Jagtap, Vice-President:- This appeal filed by the assessee is directed against the order of ld. Principal Commissioner of Income Tax, Kolkata-9, Kolkata dated 13.03.2020 passed under section 263 of the Income Tax Act, 1961.

ITA No. 442/KOL/2020 A.Y. 2015-2016 Gopal Chandra Manna

course of assessment proceedings, it was brought to the notice of the assessee by the Assessing Officer that the turnover declared by him in the Service Tax Returns for the year under consideration was Rs.7,17,79,295/- as against the turnover of Rs.6,38,06,619/- declared in the Income Tax Return. The assessee, therefore, was called upon to explain the difference of Rs.79,72,676/- in the turnover. In reply, it was submitted by the assessee that the turnover shown by the Consultant in the Service Tax returns was wrong and since he was bedridden at the relevant time due to serious illness, the mistake committed by the Consultant in declaring wrong turnover in the Service Tax Returns remained undetected. It was also submitted before the Assessing Officer that the assessee being a Government Contractor, there could not be any undisclosed turnover without TDS. It was accordingly contended on behalf of the assessee before the Assessing Officer that the turnover/receipts as declared in the income tax return could not be increased without there being any TDS. As an alternative, it was also submitted on behalf of the assessee that only the profit element embedded in the alleged undisclosed turnover could be added to his total income. After considering the facts of the case as well as the submissions made on behalf of the assessee, the Assessing Officer accepted the alternative contention of the assessee and added the profit @ 8% of the undisclosed turnover calculated at Rs.6,37,814/- to the total income of the assessee in the assessment completed under section 143(3) of the Act vide an order dated 22.12.2017.

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turnover. He held that the addition of only net profit @ 8% of the undisclosed turnover made by the Assessing Officer thus had rendered the assessment order made by him under section 143(3) erroneous as well as prejudicial to the interest of the revenue and accordingly a notice under section 263 was issued by him requiring the assessee to show- cause as to why the said assessment should not be revised under section 263 of the Act. In reply, reliance was placed by the assessee on various judicial pronouncements, wherein it was held that in the case of undisclosed turnover/receipts, the entire amount of undisclosed turnover/receipts cannot be treated as the income of the assessee and only the profit element embedded in such undisclosed turnover/receipts can be considered as the income of the assessee. It was contended on behalf of the assessee before the ld. Principal CIT that the view taken by the Assessing Officer while adding the profit element embedded in the undisclosed turnover/receipts thus was a possible view and it was not permissible for the ld. Principal CIT under section 263 to substitute his own view with the possible view taken by the Assessing Officer. The submissions made on behalf of the assessee did not find favour with the ld. Principal CIT. According to him, the order passed by the Assessing Officer under section 143(3) allowing deduction on account of expenses against the undisclosed turnover/receipts without making proper enquiry and without brining any iota of evidence to prove the incurring of such expenses by the assessee actually was erroneous as well as prejudicial to the interest of the revenue. Accordingly he set aside the said order vide his impugned order passed under section 263 with a direction to the Assessing Officer to frame the assessment afresh after looking into this issue. Aggrieved by the order of the ld. Principal CIT passed under section 263, the assessee has preferred this appeal before the Tribunal.

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assessee was called upon by the Assessing Officer to explain the mismatch in the turnover/contract receipts. He also invited our attention to the reply filed by the assessee in response to the said notice placed at page no. 3 & 4 of the paper book to show that the turnover shown by the Consultant of the assessee in the Service Tax Return was wrong and the same was duly explained by the assessee with reference to the details of contract works done and total deposits reflected in the Bank during the year under consideration. He contended that the case thus was made out by the assessee before the Assessing Officer to show that the turnover/receipts declared in the income tax return was correct and there was no case of undisclosed turnover/receipts as alleged by the Assessing Officer on the basis of wrong figures shown in the Service Tax Returns. He contended that the Assessing Officer, however, did not accept this contention of the assessee and made addition on account of profit element embedded in the alleged undisclosed turnover/receipts calculated @ 8%. The ld. Counsel for the assessee contended that this issue relating to the mismatch in the turnover/receipts thus was duly examined during the course of assessment proceedings and on such examination, profit element embedded in the undisclosed turnover/receipts was added by him to the total income of the assessee by applying his mind to the facts of the case. He contended that this view taken by the Assessing Officer was supported by various judicial pronouncements as pointed out by the assessee before the ld. Principal CIT during the course of proceedings under section 263 and it was thus a clear case where a possible view was taken by the Assessing Officer on the issue. He reiterated before us the proposition clearly laid down in the said judicial pronouncements holding that since there cannot be undisclosed turnover/receipts without expenses, only the profit element embedded in the undisclosed turnover/receipts can be brought to tax and not the entire amount of undisclosed turnover/receipts. He also relied on the various judicial pronouncements and contended that when the possible view of the matter is taken by the Assessing Officer, the ld.

ITA No. 442/KOL/2020 A.Y. 2015-2016 Gopal Chandra Manna

Principal CIT cannot substitute his own view with the possible view taken by the Assessing Officer under section 263 of the Act.

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a consultant other than the consultant engaged for the work of accounts and Income Tax and other related works. Due to my old age and suffering from different disease such as hyper tension, urinary problem, nervous system problem, thyroid, high pressure, spinal cord injury, I could not check all the related papers of Service Tax/Returns. In addition for last four years, due to my physical inability, I used to execute all contract/labour supply works done and supervised by my nephew and only son. Due to shivering hands for my nerves system problem, I cannot even sign my name for last few months.

All the contract jobs have been executed under W.B. Govt. Organisation named by West Bengal Power Development Corporation Ltd. at its (a) Kolaghat Thermal Power Station at Mecheda, Purba Medinipur, (b) Santaldih Thermal Power Station at Santaldih, Purulia, (c) Bakreswar Thermal Power Station at Jambuni, Suri, Birbhum. Total Contract job done during 2014-15 year is Rs.6,63,40,155/- and total Bank deposit for this year is as follows:- (i) UBI, BkTPP Br. (C/A no. Rs.4,91,55,178/- 1489050010044) (ii) SBI, Mecheda Br.(C/A No. Rs. 1,40,88,414/- 11111857505) (iii) PNB, Mecheda Br.(C/A No. Rs.26,11,872/- 2521009300003210) (iv) Axis Bank, Bagnan Br. C/A Rs.1,92.096/- No. 911020066464443) 6,60,47,560/-

I am enclosing herewith the consolidated sundry debtors a/c for this year. It is clear that the turnover shown in the service tax returns for the year 2014-15 is not correct and correct turnover/ bill value is Rs.6,63,40,155/- as shown/disclosed in the final accounts/audit report.

Now I request you to accept the turnover/ bill value for the year 2014-15 as Rs.6,63,40,155/- and consider the turnover as per service tax returns as not correct”.

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reference to the total contract works done during the year under consideration as well as the total deposits reflected in his Bank account during the year under consideration. The case thus was made out by the assessee to show that there was no undisclosed turnover/receipts as alleged by the Assessing Officer on the basis of wrong figures shown in the Service Tax Returns and the turnover as declared in the income tax return was correct. The Assessing Officer, however, did not accept the case of the assessee and considering all the facts of the case including the fact that the assessee was a Government Contractor and the entire turnover/receipts were liable to deduction of tax at source, he added the profit element embedded in the undisclosed turnover/receipts calculated @ 8% to the total income of the assessee. As rightly contended by the ld. Counsel for the assessee by relying on the various judicial pronouncements, consistent view has been taken by the Courts that undisclosed turnover cannot be achieved without incurring corresponding purchases/expenses and, therefore, what can be treated as the income of the assessee is the profit element embedded in the undisclosed turnover/receipts and not the entire amount of undisclosed turnover/receipts. This view consistently taken in the various judicial pronouncements cited by the ld. Counsel for the assessee clearly shows that the view taken by the Assessing Officer while bringing to tax the profit element embedded in the undisclosed turnover/receipts in the hands of the assessee was a possible view and it was not permissible for the ld. Principal CIT under section 263 to substitute his own view with the possible view taken by the Assessing Officer. As held by the Hon’ble Delhi High Court in the case of CIT –vs.- Honda Siel Power Products Limited [2010] 194 Taxman 175, in cases, where the Assessing Officer adopts one of the courses permissible in law, or where two views are possible and the Assessing Officer has taken one of the possible views, the Commissioner cannot exercise his powers under section 263 to differ with the view of the Assessing Officer. Keeping in view this proposition and having regard to the facts of the case, we hold that there was no error

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in the order of the Assessing Officer under section 143(3) as alleged by the ld. Principal CIT and the impugned order passed by him under section 263 revising the same is not sustainable. We accordingly cancel the same and allow this appeal of the assessee.

By order

Senior Private Secretary/DDO, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.