What did the Tribunal hold?

The Tribunal directed the Assessing Officer to re-estimate the assessee's profits by taking an average of the profits from the three preceding and succeeding assessment years. This direction is conditional on the assessee providing all relevant details.

The assessee challenged the CIT(A)'s confirmation of disallowance of expenses. The lower authorities estimated the assessee's profits without comparing them to previous or subsequent years.

What were the issues?

Whether the estimation of profits by the lower authorities was arbitrary. Whether the profits should be re-estimated based on a comparison with other assessment years.

M R International vs ITO | ITAT Kolkata 2018

Income Tax Appellate Tribunal, “SMC” BENCH : KOLKATA

Before: Hon’ble Shri S.S. Godara, JM]

Hearing: 12.09.2018Pronounced: 28.09.2018

This assessee’s appeal for assessment year 2007-08 arises against the CIT(A)-13, Kolkata’s order dated 16.01.2018 passed in case no. 158/CIT(A)-13/W-44(2)/Kol/2014- 15 involving proceedings u/s 143(3) of the Act. Heard both the parties. Case file perused.

It emerges at the outset that the assessee’s sole substantive grievance raised in the instant appeal seeks to challenge the CIT(A)’s action in confirming disallowance of expenses of Rs. 7,12,254/- under various accounts debited to profit and loss account out of total disallowance of Rs. 13,74,847/- made in the course of assessment thereby partly allowing expenses of Rs. 66,82,596/- in the lower appellate discussion reading as follows:

M.R. International A.Yr. 2007-08 “Decision:- 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 the appeal is filed on 29.01.2010 against order passed u/s 143(3) of the I.T. Act. In this case various notice dated 08.01.2015, 10.02.2015, 27.06.2016, 22.11.2016 and 03.04.2017 were issued and served. In this case neither notice could be served from the ITO, W-44(2) nor the appellant came for hearing and the last hearing attended by him was 28.01.2015 where he has demanded for sufficient time of opportunity in the ground of appeal itself. The appellant has stated that : ‘the business of the assessee being based in Varanasi and the auditor and tax consultant being also based in Varanasi, a tax practitioner in Kolkata could be arranged only in mid November. The AO demanded the books in December. The total books were ready in our computer. But getting the books printed and sending them to Kolkata could not be arranged by December. How the books are ready for submission. The disallowance by the ITO were not based on any specific findings but disallowed generally. The assessee reserves the right to submit further grounds at the time for hearing of the appeal.’ But the appellant never filed any paper book or submission against the order passed by the AO. Perusal of assessment order shows that the AO has added entire receipt due to reason that various opportunity was given to prove that expenses but the appellant did not produce and documentary evidences. Perusal of appellant non-submission of detail laid to the AO to gross profit of the appellant at Rs. 16,62,596/-. The appellant is dealer in Electric bulb. The gross profit has been worked out by the appellant is at Rs. 16,62,596/-. Considering the nature of business out of his total gross profit of Rs. 16,62,596/- the same of Rs. 16,62,596/- is further allowed as an expenses apart from depreciation of Rs. 50,039. The AO is directed to recomputed the income accordingly.”

3. Few key facts emerge from the instant case file as well as above extracted discussion. This assessee is a trader in bulbs etc. Both the lower authorities have estimated its profits to Rs. 16,62,596/-. I find that neither the Assessing Officer nor the CIT(A) have compared the impugned estimation with the corresponding rate either in preceding or succeeding assessment year(s). There is no change in suspicion throughout. I therefore deem it fit in larger interest of justice that the Assessing Officer needs to consider assessee’s impugned profits to be average of the three immediate preceding and succeeding years. Learned counsel states at bar that the assessee undertakes to file all the relevant details in consequential proceedings. I therefore make it clear that the above estimation direction issued to the Assessing Officer for reestimation of profits at an average of corresponding figures of the preceding or 2

M.R. International A.Yr. 2007-08 succeeding assessment year(s) shall be subject to the condition of the assessee placing on record all relevant details failing within the three chances falling which this order would stand vacated.

This assessee’s appeal is accepted for statistical purposes in above terms.

Order pronounced in the Court on 28.09.2018

M R INTERNATIONAL,KOLKATA vs. ITO, WARD - 44(2), KOLKATA, KOLKATA

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