DEPUTY COMMISSIONER OF INCOME TAX, GUWAHATI vs. SANKHA PRESS PVT LTD, GUWAHATI

The facts in brief are that the ld. AO, during the course of assessment proceedings, noted that assessee had credited a sum of ₹2,04,423/- to the profit and loss account which was deducted from the total business income of the assessee while filing the return of income and no corresponding income was offered to tax. Accordingly, a show cause notice was issued to the assessee by the AO which was replied by the assessee by submitting that the profit on sale of motor car has been reduced from the business income in the computation of total income because block of depreciable assets did not cease to exist as the entire sale consideration of sale of vehicle had been adjusted and reduced from the said block of asset depreciable at 15% depreciation. However, the ld. AO added the amount to the income of the assessee on the ground that the assessee has failed to furnish any evidences in that regard.

In the appellate proceedings, the ld. CIT (A) allowed the appeal of the assessee after taking into account the assessee’s explanation as the motor car sold was part of the depreciable assets and entire sale prices of ₹3,85,000/- was adjusted in the schedule of depreciation. The ld. CIT (A) noted that since the block of assets (Motor Car) having rate of depreciation at 15% did not cease to

The issue raised in ground 2 and 3 of Revenue’s appeal is against the order of ld. CIT (A) deleting the addition of ₹3,99,92,042/- as made by the ld. AO u/s 69C of the Act and ₹1,89,15,088/- as unexplained expenditure in relation to import purchases. The assessee has also raised ground no.3 in Cross Objection supporting the order of the ld. CIT (A), deleting these additions.

The facts in brief are that the ld. AO noted from the ITS Data that assessee had made import purchases of different types of news and reels for different specifications and accordingly assessee was called upon to provide the copy of ledger account stating along with invoices nos. and dates, names of the parties and country, description of items, invoice value, amounts included in purchases in ITR, Difference ,if any, and reasons for difference, assessable value for custom, Duty paid, however the assessee did not furnish any reply. The ld. AO noted on the basis of reply of the assessee dated 24.12.2018, that assessee submitted a chart claiming to be

Similarly, the assessee paid freight expenses of ₹1,70,83,525/-, insurance of ₹9,60,948/- landing charges of ₹8,70,615/- as reported by CBEC Import Export data for which no details were filed by the assessee.

In the appellate proceedings, the ld. CIT (A) allowed the appeal of the assessee by observing and holding as under: -

The issue raised in ground no.4 in Revenue’s appeal is against the restricting the disallowance of Rs. 29,04,610/- being 10% ₹2,90,64,156/- as made by the ld. AO towards writers remuneration of Rs. 2,90,64,156/-and assessee in cross objection’s ground no.5 challenged the part sustaining the addition.

In the appellate proceedings, the ld. CIT (A) partly allowed the appeal of the assessee by deleting 90% of the disallowance and sustaining 10% of the disallowance.

The Revenue is in appeal before us challenging the order of ld. CIT (A) vide ground no.4 and assessee in cross objection’s ground no.5 challenged the appeal by sustaining the addition to the extent of 10%.

After hearing the rival contentions and perusing the materials available on record, we find that the assessee has incurred these expenses towards payment to writers’ and contributors which was disallowed by the ld. AO on the ground that no evidences were produced during the assessment proceedings. The assessee claimed before the ld. AO that it was regular practice of the business of printing and publication of newspaper, magazine etc. to collect articles, contents, columns, write-ups, from different writers, authors, script preparations from various parts of the country. The assessee submitted that payments were made as honorarium to such contributors. The assessee also submitted huge volume of list of such contributors and amounts paid to them as honorarium which was petty and small amounts and in some cases the contributors could not produce their bank accounts and hence the amounts were paid in cash. None of the payments were

The issue raised in ground nos.6 to 10 of assessee Cross Objection are against the confirmation of disallowance by ld. CIT (A) as made by the ld. AO in respect of transportation and distribution charges of ₹35,47,492/- (being 5% of ₹3,16,18,142/-), ₹2,40,000/- on account of writing charges, ₹3,16,18,342/- being 5% of the total purchases of ₹63,23,66,846/-and ₹4,37,693/- being 5% of other expenses comprising repair and maintenance of building and machinery, general and other miscellaneous expenses, other expenses and other repair and maintenance expenses etc.

The facts in brief are that the ld. AO, during the course of assessment proceeding, observed that assessee has not produced the books of account and therefore, AO made adhoc disallowance at the rate of 5% in respect of transportation and distribution expenses thereby calculating the disallowance at ₹35,47,492/- on the ground that inflation of the said expenses could not be ruled

Similarly, in respect of book writing expenses the AO noted that since the assessee has not furnished any books of accounts, therefore, it is presumed that assessee has not maintained any books of account. Consequently, the entire accounting charges were disallowed. As regards printing material purchases, the AO made a disallowance of ₹3,16,18,342/- being 5% of the total purchases on the ground that the assessee could not prove these expenses. Similarly, ₹4,37,693/- was disallowed in respect of repair and maintenance, office expenses and other expenses etc. equal to 5% of the total expenses charged to the Profit and Loss account.

The ld. CIT (A), in three lines conclusion, dismissed the appeal of the assessee by noting that the Gross Profit of the assessee was 92.62% whereas the final net profit was mere 0.5% and thus justified the addition.

After hearing the rival contentions and perusing the materials available on record, we find that the justification given by the ld. CIT (A) is not reasonable and plausible on the ground that the disallowance of expenses cannot be made merely on the ground that the assessee has recorded a low Net Profit during the year. The ld. AO has not pointed out the same specific difference/ defects in the records. In the present case, the books of accounts were not rejected and no reason has been assigned for making the disallowance on estimated basis. Therefore, the disallowance made by the ld. AO and confirmed by the ld. CIT (A) are mere on the surmises and presumption basis and cannot be sustained. We have

The facts in brief are that the assessee filed the return of income on 01.11.2017, declaring total income of ₹35,95,850/-. The case of the assessee was selected for limited scrutiny under Computer Assisted Scrutiny Selection (CASS) and accordingly, the notice u/s 143(2) of the Act was issued on 27.08.2018. The statutory notices

In the appellate proceedings, the ld. CIT (A) allowed the appeal of the assessee by deleting the disallowances made by the ld. Assessing Officer.

The ld. Counsel for the assessee vehemently submitted that the notice u/s 143(2) of the Act vide order dated 27.08.2018, a copy of which is available at page no.1 of the Paper Book, does not specify whether it is a limited scrutiny or a complete scrutiny or a compulsory manner scrutiny. The ld. AR submitted that the CBDT has issued specific instruction vide instruction no. F. No. 225/157/2017/ITA-II Dated 23-06-2017, that the notice u/s 143(2) can be issued in any one of the three formats which was specifically mentioned and prescribed but in the present case the notice issued is not in accordance with such said instruction and therefore, the assessment framed consequently is invalid and void ab initio. The ld. AR in defense of his argument relied on the decision of Tapas Kumar Das Vs. ITO in ITA No. 1660/KOL/2024

The ld. DR on the other hand submitted that this is a computer- generated notice and the non-mentioning of the fact of either limited or complete scrutiny or compulsory manual scrutiny would not render the issuance of notice u/s 143(2) of the Act as invalid. Therefore, additional ground raised by the assessee may kindly be dismissed.

After hearing the rival contentions and perusing the materials available on record, we find that undisputedly the notice issued u/s 143(2) of the Act dated 11.08.2018, specifies only computer aided scrutiny selection which neither mentioned it either to be a limited or a complete scrutiny nor compulsory manual scrutiny. Thus, the said notice has been issued in violation of the instruction issued by CBDT as noted above. In our opinion, the revenue authorities have to follow the instruction issued by CBDT and violation thereto would certainly render the notice as invalid with the result of all the consequential proceeding would also be invalid. The case of the assessee find support from the decision of the co-ordinate Bench in the case of Tapas Kumar Das Vs. ITO (supra), wherein a similar issue has been decided in favour of the assessee. The operative part of the same is extracted below:-

Since, we have allowed the CO of the assessee on legal issue, the appeal of the Revenue in ITA No. 127/GTY/2025 becomes infructuous, and hence, dismissed.

In the result, the appeals of the Revenue are dismissed and COs' of the assessee are allowed.