MUTHURAJAN PADMAVATHI,CHENNAI vs. ITO, CHENNAI

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ITA 576/CHNY/2017Status: DisposedITAT Chennai31 May 2017AY 2012-136 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee's agreement to an addition indicated a lack of confidence in their accounts. Therefore, the Assessing Officer was justified in not pointing out specific defects, and the addition was rightly made.

What were the facts?

The assessee's books of accounts were subject to tax audit, and no defects were pointed out. However, the Assessing Officer made an addition to the gross profit based on the assessee agreeing to offer a higher profit ratio during scrutiny assessment.

What were the issues?

Whether an addition to gross profit is sustainable when the assessee agrees to it during assessment, even if books were tax-audited without defects.

Which sections of the Income-tax Act were involved?

Section 44AB

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, ‘B’ (SMC

Before: SHRI ABRAHAM P. GEORGE]

आदेश / O R D E R Assessee in this appeal against an order dated 19.01.2017 of ld. Commissioner of Income Tax (Appeals)-5, Chennai has taken the following grounds.

‘’1. The order of The Commissioner of Income Tax

ITA No.576/Mds/2017 :- 2 -:

1.

(Appeals) 5, Chennai dated 19.01.2017 in 1,T.A.No.34/CIT(A)-5/2015-16 for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case.

2.

The CIT (Appeals) erred in sustaining the gross profit addition of Rs.8,49,345/- in the computation of taxable total income without assigning proper reasons and justification.

3.

The CIT (Appeals) failed to appreciate that the sustenance of the said addition on technical ground was wholly unjustified and ought to have appreciated that the distinction between the Court of Record and Quasi Judicial Authority was not considered before applying the technical reason to sustain the said addition.

4.

The CIT (Appeals) failed to appreciate that having extracted the grounds of appeal in the impugned order which clearly indicated the challenge/ground raised to question the technical issue, applying the technical reason to sustain the said addition was bad in law.

5. The CIT (Appeals) went wrong in recording the findings in this regard from para 6.1 of the impugned order without assigning proper reasons and justification. 6. . The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles natural justice would be nullity in law.

7.The Appellant craves leave to file additional grounds/arguments at the time of hearing’’.

A reading of the grounds show that assessee is aggrieved on 2. a gross profit addition of �8,49,345/-.

Ld. Counsel for the assessee submitted that the addition on 3. gross profit was done without rejecting the books of accounts and without pointing out any defects therein. As per the ld. Authorised

ITA No.576/Mds/2017 :- 3 -:

Representative accounts of the assessee were subject to tax audit under Sec. 44AB of the Income Tax Act, 1961 (in short ‘’the Act’’) and no defects were pointed out by the auditor in his tax audit reports.

According to him, the audited financial results ought not have been ignored by the lower authorities. As per the ld. Authorised Representative, just because the assessee agreed to offer a higher profit, the addition should not have been made. According to him agreeing to an addition before a quasi-judicial authority like Assessing Officer will no estopp the assessee from assailing such addition before an appellate authority, since proceedings before the ld. Assessing Officer were not akin to proceedings before a Court of Record.

Reliance was placed on the decision of a Co-ordinate Bench of this Tribunal in the case of Shri. S. Velumani vs. ITO (ITA No.1839/Mds/2013, dated 28.02.2014).

Per contra, ld. Departmental Representative submitted 4.

assessee could never be aggrieved on an admitted addition. As per the ld. Departmental Representative the ld. Assessing Officer had not specifically noted the defects in the accounts of the assessee considering the enhanced gross profit accepted by the assessee.

Reliance was placed by the ld. Departmental Representative on the ITA No.576/Mds/2017 :- 4 -: judgment of Jurisdictional High Court in the case of Ramanlal Kamdar vs. CIT, 108 ITR 0073.

5.

I have perused the orders and heard the rival contention.

Relevant para of the assessment through which the addition in gross profit was done by the ld. Assessing Officer reads as under:- ‘’During the course of scrutiny assessment, it is seen from Audit Report filed by the assessee that he has admitted 0.74% as Gross Profit ratio on the turnover of Rs.42,46,72,696/-. It is further seen, though the Gross Profit has increased during this financial year, the net profit admitted is 0.18% which is the same as admitted for the A.Y.2011-12. The assessee was requested to clarify the reason for adopting the same Net Profit as admitted in the A.Y.2011-12. For this the authorized representative agreed to adopt the Gross Profit ratio at 0.94% as against 0.74% already admitted on the turnover and the difference of 0.20%, works out to Rs.8,49,345/- on the turnover, which is added to the total income of the assessee, over and above the income return by the assessee’’.

Ld. Authorised Representative has relied on decision of Co-ordinate Bench in the case of Shri. S. Velumani (supra) for arguing that agreeing to an addition per se will not be enough but Assessing Officer was obliged to show defects in the accounts, more so since assessee’s books were subject to tax audit. Para 6 of this order, which has been heavily relied on by the ld. Authorised Representative is reproduced hereunder:-

ITA No.576/Mds/2017 :- 5 -:

‘’6. We have heard both parties and gone through the case file. The assessee argues that neither he nor his authorized representative had ever made any concession with the CIT(A) agreeing with the addition to the extent of 50%. A perusal of the CIT(A)’s order makes it clear that balance 50% of the addition has been confirmed only on such an agreement by the assessee’s authorized representative However, nothing is forthcoming as to whether the same was submitted in writing or not. In our view, such a concession in the absence of specific authorization either by the assessee or authorized representative, carries no value. We quote latest case law of hon'ble supreme court in case of Urviben Chiragbhai Sheth vs Vijaybhai SLP(C) No.896 of 2006 holding that such a statement made only before a ‘court of record’ is sacrosanct. So, this argument of the Revenue stands rejected’’.

What contrasts the above case from the facts here is that 6. assessee here has not contested the claim of the ld. Assessing Officer that assessee had agreed to the enhanced gross profit rate. In my opinion there is much strength in the argument of the ld. Departmental Representative that, Assessing Officer considering the admission did not find it necessary to point out the defects in the accounts of the assessee. As to the argument of the ld. Authorised Representative, that books of the assessee were subject to a tax audit under section 44AA of the Act, in my opinion, if the assessee was so sure about its account, it would have never agreed to a gross profit addition. Once assessee has agreed to an addition, in my opinion, he cannot have any grievance against the assessment. Hence in my

ITA No.576/Mds/2017 :- 6 -: opinion the addition for low gross profit was rightly made by the ld. Assessing Officer, and confirmed by the ld. Commissioner of Income Tax (Appeals).

7.

In the result, appeal of the assessee is dismissed.

Order pronounced on Wednesday, the 31st day of May, 2017, at Chennai.

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