ITO, WD-32(2), KOLKATA, KOLKATA vs. M/S PEIPING RESTAURANT, KOLKATA

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ITA 440/KOL/2016Status: DisposedITAT Kolkata15 December 2017AY 2011-20123 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s view that only a profit on suppressed sales should be added, not the entire turnover. However, it reversed the CIT(A)'s decision on sales tax, holding that the entire un-deposited sales tax collected from customers should be treated as income.

What were the facts?

During a survey, the Income Tax Officer found suppressed sales and un-deposited sales tax collected from customers. The AO added the suppressed sales and the un-deposited sales tax as income. The CIT(A) directed that only a net profit on suppressed sales and a modified amount on sales tax should be added.

What were the issues?

Whether suppressed sales should be treated as income and how un-deposited sales tax collected from customers should be taxed.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 40(a)(ia),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA

Before: Sri J. Sudhakar Reddy, Hon’ble & Sri S.S. Viswanethra Ravi, Hon’ble]

Appearances by: Shri Sanjay Bhattacharya, Advocate, appeared on behalf of the assessee. Shri Sallong Yaden, Addl. CIT, DR, appearing on behalf of the Revenue. Date of concluding the hearing : November 11th, 2017 Date of pronouncing the order : December 15th, 2017

O R D E R Per J. Sudhakar Reddy :-

This appeal filed by the revenue is directed against the order of the ld. Commissioner of Income Tax (Appeals)-9, Kolkata, (hereinafter the ‘ld. CIT (A)’), passed u/s 250 of the Income Tax Act, 1961 (the ‘Act’), dt. 31/12/2015, for the Assessment Year 2011-12.

2.

The assessee is a partnership firm and is in the business of running a restaurant at Park Street, Kolkata. During the course of survey, certain material was impounded. The Assessing Officer in his order passed u/s 143(3) of the Act, came to the conclusion that the assessee had supressed his sales. The undisclosed sales were added as income. The amount added was Rs.46,24,230/- . Further, the Assessing Officer was of the view that the assessee had collected sales tax from the customers and has not deposited the same with the Government and this resulted in a profit to the assessee. He made an addition of Rs.8,71,058/-. Further disallowance was made u/s 40(a)(ia).

2 Assessment Year: 2011-12 M/s. Peiping Restaurant 2.1. Aggrieved the assessee carried the matter in appeal.

3.

The ld. First Appellate Authority, held that the entire turnover cannot be treated as income. He directed the Assessing Officer to apply the net profit rate disclosed by the assessee in its regular books of account on its recorded sales, to this supressed turnover. He rejected the contention of the assessee that the Assessing Officer has not followed the correct procedure while taking out the printout from the impounded computers, etc. On the addition made on account of sales tax calculated on supressed turnover and not remitting the same to the Government, the ld. CIT(A), directed the Assessing Officer to calculate the net profit on the same as in the case of unaccounted sales and increase the same by another 2 per cent. 3.1. Aggrieved the Revenue is in appeal before us.

4.

After hearing rival contentions, we uphold the finding of the ld. CIT(A) to the extent that the entire undisclosed turnover cannot be treated as income. Only a percentage of profit on this undisclosed turnover should be the income of the assessee. Thus, Ground No. 1 & 2 of the Revenue’s appeal is dismissed.

5.

Ground No. 3 & 4, are against the finding on the sales tax calculated by the assessee on undisclosed turnover. The ld. Counsel for the assessee, vehemently contended that no sales-tax is collected on supressed turnover. He filed certain papers in support of his contention.

5.1. We find that the Assessing Officer, after examining the impounded material, books of account and contentions of the assessee came to a conclusion that the total taxes received by the assessee from the customers stands at Rs.13,56,468/-. Out of this, only Rs.4,85,410/-, has been paid by the assessee to the Government. The difference of Rs.8,71,058/-, is added as income of the assessee. The argument of the assessee that no sales tax has been collected by the assessee, is not supported by any document or any evidence. Thus, this contention of the assessee is rejected. The ld. CIT(A), in our view, was in error in holding that only a percentage of such sales tax collected, should be treated as income of the assessee. The sales tax as and when paid would be allowed as an expenditure. The decision to tax only a small percentage of the 3 Assessment Year: 2011-12 M/s. Peiping Restaurant sales tax collected as income of the assessee is factually incorrect. Thus, we reverse the finding of the ld. CIT(A) and allow Ground No. 3 & 4, of the revenue.

6.

In the result, appeal of the revenue is allowed in part.

Kolkata, the 15th day of December, 2017.

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