K.LAKSHMANAN,SALEM vs. ITO WARD 1(1), SALEM

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals), Salem, dated 12.09.2017 relevant to the assessment year 2009-10. Besides challenging the reopening of assessment under section 147 of the Income Tax Act, 1961 [“Act” in short], the assessee also challenged confirmation of addition towards estimation of commission receipt.

Brief facts of the case are that the assessee is engaged in the business of sale of grapes and filed his return admitting income of ₹.6,42,110/- and agricultural income of ₹.4,50,000/-. The return of income filed by the assessee was processed under section 143(1) of the Act. Subsequently, the case of the assessee was reopened by recording the reasons and notice under section 148 of the Act was issued and against the above notice, the assessee submitted that the return of income originally filled by the assessee shall be considered as proper compliance to the notice. Further, notice under section 143 (2) dated 13.06.2014 was also issued to the assessee. In response to the notice, the Authorised Representative of the assessee Sri R. Suresh appeared and filed details. Admittedly, the assessee has not maintained books of accounts for the assessment year 2007-08. The assessee stated during the assessment proceedings that for reopening the assessment there should be live nexus between the material and the income escaping assessment and the reason recorded under section 147 based on National Survey Report are not relevant to the assessee. With regard to cash deposit of ₹.1,84,00,000/- in S.B.A/c, the assessee furnished bank statement and stated that the cash deposits consist of commission sale realizations payable to grape growers at Sangli, Bus collections and Lorry collection. It was also stated that the grapes grown by the agriculturists at Sangli are distributed by the assessee through sub commission agents in Tamil Nadu and Kerala and gets 3% commission from the growers on the net realized amounts from sub agents and after meeting expenses the income has been admitted which is based on net incremental asset method. In this regard, the assessee furnished his personal statement of affairs for the A.Y. 2006-07 and 2007-08 which were examined by the Assessing Officer.

The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions as well as facts of the case, the ld. CIT(A) confirmed the addition.

On being aggrieved, the assessee is in appeal before the Tribunal challenging reassessment as well as confirmation of estimated addition. During the course of hearing, as per grounds of appeal, the grounds raised in Ground No. 2 to 5 relating to reopening of assessment, the issue was not pressed by making endorsement in the grounds of appeal that “Gr. Nos. 2 to 5 not pressed”. Accordingly, the ground of reopening of assessment under section 147 of the Act is dismissed as not pressed.

On the other hand, the ld. DR strongly supported the orders of authorities below.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. Since the assessee has not maintained the books of accounts for his business, the estimation of 5% commission income determined by the Assessing Officer was confirmed by the ld. CIT(A). However, on similar facts and circumstances, in the case of ITO v. Shri P. Ramesh in & C.O. No. 100/Mds/ 2017 dated 27.10.2017 relevant to the assessment year 2009-10, after considering the entire facts of the case and in the absence of any books of account, the Tribunal directed the Assessing Officer to consider 4% of the total receipt as commission. Similarly, in the present case also, we are of the opinion that considering the nature of business and in the absence of books of account, the Assessing Officer is directed to consider 4% of the total receipt as commission instead of estimating @ 5%. Thus, the ground raised by the assessee is allowed for statistical purposes.

In the result, the appeal filed by the assessee is allowed for statistical purposes.