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Income Tax Appellate Tribunal, “SMC” BENCH : KOLKATA
Before: Hon’ble Shri J.Sudhakar Reddy, AM]
This appeal by the Assessee arises out of the order of the Learned Commissioner of Income Tax (Appeals)-Burdwan [ in short the ld CITA] dated 31.01.2017 against the order passed by the I.T.O, Ward-1(1), Burdwan [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 27.12.2011 for the Assessment Year 2009-10.
The assessee is a partnership firm and is in the business of running a rice mill. It filed its return of income on 24.09.2009 declaring a loss of Rs. 12,949/-. Along with return of income the assessee submitted tax audit report, statement of accounts etc. The AO observed that the assessee has taken a “cash credit loan”
M/s Amaresh Rice Mill A.Yr.2009-10 from M/s United Bank of India. To verify this loan, a notice was issued to the Branch Manager of United Bank of India u/s 133(6) for furnishing the details of a stock hypotheticated against the cash credited loan. In reply, the bank authorities submitted the details of the stock statement furnished to the bank for availing cash credit loan. The bank authorities also furnished a copy of the tax audit report filed by the assessee along with return of income in form 3CD. The tax audit report filed by the assessee with the bank was totally different from the audit report filed with the return of income. Both the audit reports were given by two different auditors. A notice calling for the explanation on this issue was given to the assessee. In reply, the assessee submitted that it maintained two sets of audited accounts, one for income tax purposes and the other for obtaining bank loan and that the statement of accounts prepared for the bank loan were provisional statements of accounts and that details customary practice to have two sets statement of accounts which were not the correct statements are one for obtaining higher bank loan limits and that the other statements give the actual details of transaction of the assessee. It was contended that the word ‘provisional’ was by mistake omitted in the statement submitted to the bank. The AO relied on the decision in the case of Coimbatore Spinning & Waiving Co. Ltd. vs. CIT(Madras) reported in 95 ITR 375 and took the turn over declared by the bank as turnover of the assessee and estimated the gross profit 1.8% of the turn over as income of the assessee. Aggrieved, the assessee carried the matter in appeal without success. Further aggrieved the assessee is in appeal before us.
The Ld. Counsel for the assessee submitted that, the word ‘provisional’ was erroneously not mentioned in the statements and tax audit report furnished to the 2
M/s Amaresh Rice Mill A.Yr.2009-10 bank. He submitted that it is common practice that estimated figures are furnished to the bank. It was contended that the AO should have considered the accounts submitted along with return of income and not gone by the statements submitted before the bank. As the bank insists on a certificate from Chartered Accountant and as there is no other form or procedure for certifying accounts, an audit report u/s 44AB in form no. 3CD was obtained from a CA and that this audit report is only on the provisional statement. He argued that no defects have been pointed out in the books of accounts produced by the assessee by the AO. He relied on the decision of Kolkata “B” Bench of the Tribunal in the case of M/s Damani & Co. vs. ITO in order dated 10.11.2015 and submitted that when two sets of accounts are maintained the correct set of accounts was only to be considered. On the issue of net profit he submitted form the past record, the percentage of profit as a percentage of turnover was between 1.17% to 1.87%. He vehemently contended that the AO has followed a pick and choose method and has not given a show cause notice as to how he would frame the assessment order and that this was a case of violation of principles of natural justice.
The Ld. DR, Mr. Sanjay Mukherjee, Sr. DR on the other hand submitted that there were two sets of audited books of accounts and both have been subject matter of tax audit by different CA’s. The assessee did not lead evidence to prove that one of the accounts were wrong. Under the circumstances, he submitted that the order of the first appellate authority confirming the order of the AO should be upheld.
M/s Amaresh Rice Mill A.Yr.2009-10
After hearing rival submissions, we find that two different CA’s have given two different tax audit reports based on two separate books of accounts. There is no mention anywhere that the statement of accounts and audit reports given to bank are “provisional” figures or that they were projections. One set of accounts is certified by P.K. Roy & Co. CA Enrollment no. 52424. This audit report along with audited statement of accounts were filed before the bank. Sales of rice as per this trading account is Rs. 12,76,63,295/-. The report in Form 3CD was complete and certified. 3CD report is never given as provisional statements on projections.
The second audit report dated 17.09.2009 has been given by Brindaban Mukherjee, CA, member enrollment No. 52853. This audit report along with the statement of account were submitted along with return of income. Here the sales disclose was Rs. 3,21,70,392/-. Closing stock in both the statements is identical. There is variation in purchases, sales and in expenditures. Though the assessee originally claims that audit report signed by Shri P.K. Roy is based on provisional accounts, no evidence to that effect has been furnished by him. When such a contradictory and conflicting statement of accounts have been prepared by the assessee, burden of proof lies on the assessee to demonstrate as to which one of such account statement is correct. When the assessee does not discharge the burden of proof, then the AO has no other alternative but to take as whichever evidence statement of account is correct as per his view. It is not correct to argue that as there is no audit requirement for the partnership firm and that any audit report cannot be given in any other form than that which is prescribed under Form 3CD of the Act and Rules. In the form no. 3CD r.w.s 4
M/s Amaresh Rice Mill A.Yr.2009-10 44AB of the Act certain facts have to be certified by the assessee as well as the auditor. A number of other methods are there which auditors generally followed to certify the statement given to bank. Under the circumstances we find no merit in the submissions of the assessee. The decisions relied upon by the assessee does not come to his rescue as in case of ITO vs Kala Baran Banerjee in the matter was remanded to the file of the AO. The decision on the case of Damani & Co. is not different facts. Under the circumstances we reject this contention of the assessee. Hence, we uphold the order of the Ld. CIT(A) as this issue and dismiss the ground of the assessee.
Ground no. 2 is against the estimation of profit @ 1.8% of the turnover.
The assessee’s submission is that rate of profit varies between 1.17% to 1.87% for the last few years. Hence we, in the interest of justice direct the Ld. AO to estimate profit @ 1.23% of turnover. The assessee gets part relief.
Grounds no. 1 and 4 are general in nature and do not require any adjudication.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Court on 05.01.2018