MRS. DEVI MAGESH BABU,ARNI vs. ITO WARD 2, CHENNAI

This is an appeal filed by the assessee against the order of the Commissioner of Income-tax (Appeals)-13, Chennai in dated 19.09.2017 for the assessment year 2014-15

It was submitted by ld.A.R that assessee runs petrol bunk of IOC at Vellore. It was a submission that the turnover of assessee was `44.53 crores and the net profit declared was `14 lakhs. It was a submission that the ld. Assessing Officer on presumption that the salaries paid by the assessee to the staff at `15,250/- was excessive, determined the salary paid per employee at `5,000/- per month and made corresponding disallowance. It was a submission that the ld. Assessing Officer had also disallowed business promotion expenses of `1,48,111/-, which was the expenditure incurred by the assessee on one of the vehicles of its customers in which the employee of the assessee had filled petrol instead of diesel and it had resulted substantial repairs to the vehicle. It was a submission that consequently ld. Assessing Officer had estimated the income of assessee by taking the profit earned at 20 paise per litre (Diesel/Petrol). It was a submission that no estimation can be done to the assessee’s income, unless books were rejected by the ld. Assessing Officer. It was a prayer that the addition made by ld. Assessing Officer amounting to `13,73,445/- along with penalty proceedings u/s.271(1)(c) of the Act may be deleted.

In reply, the ld.D.R submitted that books of accounts had been called for in the course of assessment proceedings, which is evident in pages 1 & 2 of the assessment order. It was a submission that no books were produced and consequently, there was nothing for the ld. Assessing Officer to reject. It was a further submission that as the books had not been produced, the hands of the ld. Assessing Officer were tied and the same had resulted in the estimation. It was a further submission by ld.D.R that he had no objection, if the issues are restored to the file of ld. Assessing Officer for denovo assessment. To this proposition, the ld.A.R also fairly endorsed the view of the ld.D.R and agreed that the issues may be restored to the file of ld. Assessing Officer.

I have considered the rival submissions. A perusal of para-5 of the assessment order shows that salary paid by the assessee to her employee at `15,250/- per month has been rejected, and the salary taken at `5,000/- per month. This has been done on the basis of inquiry done by the Inspector attached to the Assessing Officer’s office. It is noticed that this has not been put to the assessee for rebuttal. Further, the ld. Assessing Officer has rejected the assessee’s claim of business promotion expenditure without examining the vehicle owner. The ld. Assessing Officer has also not examined whether the vehicle had actually incurred the said expenditure and whether insurance had been claimed on the same. Further, how the ld. Assessing Officer has determined 20 paise per litre (Diesel/Petrol) as a profit earned is also not coming out of the assessment order. A perusal of assessment order also admittedly shows that there is no recording of the books having been produced before the ld. Assessing Officer.

In the result, the appeal of the assessee is partly allowed for statistical purposes.