ITO, WARD-45(3),KOLKATA, KOLKATA vs. MANIK LAL DEY, KOLKATA

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ITA 2343/KOL/2016Status: DisposedITAT Kolkata20 February 2019AY 2011-123 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the CIT(A) was correct in confirming only the profit element (4%) on the undisclosed turnover, as turnover includes cost of material and gross profit. The entire turnover cannot be treated as income.

What were the facts?

The Assessing Officer (AO) added the entire suppressed turnover of ₹1,13,50,000/- as undisclosed income under Section 68. The Commissioner of Income Tax (Appeals) deleted this addition and confirmed only 4% profit on the suppressed turnover.

What were the issues?

Whether the entire suppressed turnover can be treated as undisclosed income, or only the profit element thereof. Whether penalty under Section 271(1)(c) is leviable on the entire turnover.

Which sections of the Income-tax Act were involved?

Section 68,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA BENCH “C” KOLKATA

Before: Shri S.S.Godara & Dr. A.L. Saini

O R D E R

PER S.S.Godara, Judicial Member:

1.

- These three cases for assessment year 2011-12 pertain to a single assessee, Shri Manik Lal Dey. The Revenue’s former two quantum appeal(s) & 2343/Kol/2016 arise from Commissioner of Income Tax (Appeals)-13 Kolkata’s common order dated 12.08.2016 passed in case Nos.38/CIT(A)-13/Kol/W-45(3)/2014-15, in proceedings u/s. 147/144 of the Income Tax, 1961; in short ‘the Act’. Its last appeal ITA No.2344/Kol/2016 consequential is penalties directed against the very CIT(A)’s order dated 25.09.2014 in case No.37/CIT(A)-13/W-45(3)/2014-15, in proceedings u/s 271(1)(c) of the Act’. Heard both the parties in quantum as well as penalty proceedings. Case file(s) perused.

2.

It transpires at the outset that the Revenue’s former two quantum appeals raise on identical issue that the CIT(A) has erred in law as well as on , 2343-2044/Kol/2016 A.Y. 2011-12 ITO Wd-45(3), Kol. Vs. Manik Lal Dey Page 2 facts in not considering the capital involved for purchase of ₹1,08,96,000/- in the nature of assessee’s undisclosed source of income resulting in alleged undisclosed sale of ₹1,13,50,000/-. The CIT(A)’s detailed discussion on this issue reads as follows:- “Decision:- 5. I have gone through the contention of the assessee, the order passed by the AO and the submissions made by the Appellant. The decision of this appeal is given as under:- ‘In this case addition of Rs.1,13,00,000/- has been made by the AO. While adding so the AO has observed that the assessee had shown gross sales of Rs.36,50,000/- in is return. But during the course of survey assessee himself disclosed on oath dated 07-01-2012 that his turnover was Rs.1.5 cr for the assessment year 2011-12. On the basis of above the AO worked out suppressed dale of Rs.1,13,50,00/- (Rs.1,50,00,000/- - Rs.36,50,000/-) and entire suppressed turnover was made as an income of the appellant under section 68 of the IT Act. Here it is mentioned that though in the body of the order the AO has calculated the addition to the tune of Rs.1,13,50,000/- but in the computation he has added only Rs.1,13,00,000/-. This mistake is taken into consideration while deciding this ground of appeal

. During the course of appellate proceeding the AR of the appellant has submitted that the estimated undisclosed turnover of Rs.1,13,50,000/- has been fully taxed by the AO whereas only net commission should have been assessed by the AO as the AO himself has assessed the net percentage of commissions at 4% for other year; the same should have been applied to the undisclosed turnover of the appellant. I agree with the view of the appellant that turnover cannot be the income of the appellant. Turnover includes cost or purchase and gross profit. Only gross profit can be termed as income of the appellant. The action of the AO for adding entire turnover is baseless. Therefore, the entire addition of Rs.1,13,00,000/- is hereby deleted and only 4% profit as accepted by the AO in earlier year is upheld and estimation of profit is made on entire turnover of Rs.1,13,50,000/- which comes to Rs.4,54,000/=-. The appellant has already shown in its return of income gross sale of Rs.36,50,000/- and profit on it at Rs.1,49,917/-. Therefore, the addition made by the AO under section 68 on sale of Rs.1,13,50,000/- is hereby deleted and estimated profit @4% on undisclosed sales of Rs.1,13,50,00/- i.e. Rs.4,54,000/- is hereby confirmed.”

3. Learned Departmental Representative vehemently submits during the course of hearing that the Assessing Officer had rightly made the impugned addition of ₹1,13,00,000/- representing assessee’s entire turnover including capital disclosed during the course of survey. There is no dispute that this assessee is a commission agent / wholesaler in onion agricultural produce. The argument raised at the department’s behest is that of treatment of entire turnover amounting to ₹1,13,00,000/- as undisclosed income of the taxpayer’s. We find no merit to agree with the Revenue’s instant sole

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