I.T.O WD - 3(3),PURULIA, PURULIA vs. JAMNA DAS KHOTHARI(HUF), PURULIA

These are cross-appeal by the assessee as well as Revenue is directed against the common order of Commissioner of Income Tax (Appeals), Asansol dated 19.08.2013. Assessment was framed by JCIT, Raaaaaaange-3, Asansol, u/s 144 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 03.11.2010 for assessment year 2008-09.

Both the appeals are heard together and are being disposed of by way of common order for the sake of convenience and brevity. First we take up assessee’s appeal in ITA No.2459/Kol/2013.

Ground No. 1 to 6 are inter-related and therefore being taken up together for the sake of convenience. The first issue raised by the assessee is that Ld. CIT(A) erred in estimating the profit @ 1.5% of the total turnover.

The facts in brief are that assessee is a Hindu Undivided Family and is engaged in wholesale business of cloth. The Assessing Officer during the course of assessment proceedings requested the assessee to furnish the details in respect of several items shown in his financial statement. But the assessee failed to furnish the same and therefore AO disallowed the same as detailed hereunder:- i) Sundry creditors for goods 4860626 ii) Advance from the customers of ₹58,980/- iii) Various expenses of ₹4,52,992/- iv) Expenses in relation to exempt income of ₹91,893/- v) Interest expenses of ₹5,55,579/- Thus, the Assessing Officer disallowed the above items of sundry creditors, expenses etc., and added to the total income of assessee.

Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that duly audited financial statements along with auditor’s report u/s 44AB of the Act were filed along with return of income. Thus, the AO before making any disallowance should have made reference to the audited financial statements as well as analysis with the earlier year’s financial statement of assessee. The assessee before Ld. CIT(A) also submitted that the difference is arising between the amount of sundry creditors due to the fact that certain bills were raised at the fag-end of & 2483/Kol/2013 A.Y. 2008-09 Jamna Das Kothari (HUF) Vs. ITO Wd-3(3) Purulia Page 3 the financial year which were not entered in its books of account. However, Ld. CIT(A) observed that the assessee failed to produce the books of account and therefore he proceeded to estimate the income on the basis of available information. Thus, Ld. CIT(A) partly allowed assessee’s appeal by observing as under:- “12. In the situation described above, a fair assessment, in my view is to estimate income at a percentage of turnover. Since power of CIT(A) is co- terminus with that of Assessing Officer and in view of explanation to section 251, I invoke the power to determine income in such manner. The gross profit and net profit disclosed by appellant is as under:-

The decision in regard to disallowance 40(a))(ia) is dealt with next. It is an artificial disallowance based on a technical default. Such disallowance cannot be absorbed in the estimation as above because if two assessee in exactly identical position perform differently in aspect of compliance to a specific provision of the Income tax Act 1961 (here deduction of tax at source under section 194A), his income varies. This is due to the fact that as against real income. Income Tax Act 1961 taxes income computed in the manner stipulated in the Act. Therefore I hold that addition over and above what has been determined above is needed. 14.On the disallowance under section 40(a)(ia), I direct the Assessing Officer to make further addition only in respect of those persons to whom interest is credited and from whom appellant has not obtained Form 15G. the forwarding of such Form 15G to CIT is not material to the decision taking cue from the decision in ITO, Ward-2(3), Kolkata vs. M/s Link Consultants Pvt. Ltd. of ITAT ‘A’ Bench, Kolkata dated 29.11.2011. the Assessing Officer is directed to & 2483/Kol/2013 A.Y. 2008-09 Jamna Das Kothari (HUF) Vs. ITO Wd-3(3) Purulia Page 4 make verification of record i.e. whether Form 15G received in time in this regard and if received, not to effect any addition.

It is clarified that deduction under section 80C as allowed in assessment is to granted on income compute din manner specified in paragraph 12 and 14.

The decision in paragraph 12 disposes of grounds 2a, 2b, 3, 4, 5, 6 and 7 of appeal. The decision in paragraph 14 disposes of grounds 8 and 9. The appeal is partly allowed.”

We have heard rival contentions of the parties and perused the material available on record. The issue in the instant case relates to the income estimated by the Ld. CIT(A) @ 1.5% of the turnover. As per the argument of the Ld.AR that assessee has been declaring income between .26% and .45% in the earlier years. Admittedly, the assessee failed to produce the books of account at the time of assessment. It is also a fact to determine the actual income the books of account play the crucial role. In the absence of books of account, we find that Ld. CIT(A) had to resort to accept to determine the income to the best of his judgment. However, the income in the case of based judgment assessment should be worked out reasonable and scientific manner. As from the submission of Ld. AR we find that income declared in the earlier year is quite less than 1.5% and same was also accepted by Revenue. Considering the facts and totality we are of the view that the income on estimated basis should be .80% to the gross turnover of the assessee. It is because the amount of profit shown by assessee in the earlier years cannot be set aside while determining the income on the basis of best judgment. Therefore after considering the trend of the assessee’s business we direct the AO to re-compute the profit @ .80% of the turnover. This ground of assessee’s appeal is partly allowed. 7.1 Now coming to the Revenue’s appeal. We find that the AO has made the addition on account of difference between the creditors shown by assessee vis-à-vis shown by the respective parties though the assessee has & 2483/Kol/2013 A.Y. 2008-09 Jamna Das Kothari (HUF) Vs. ITO Wd-3(3) Purulia Page 6 filed the re-conciliation the difference by stating that certain bills were raised at the fag-end of the year which was accounted for in the subsequent year. In such situation, if the differences are added to the total income of assessee then this will lead to double taxation in the hands of assessee. Therefore, we find that the impugned order passed by Ld. CIT(A) by estimating the income in the aforesaid facts and circumstances is reasonable enough to determine the actual tax liability. Thus, we do not find any infirmity in the order of Ld. CIT(A). Thus appeal of the Revenue is dismissed.

In the result, assessee’s appeal stands allowed partly and that of Revenue is dismissed. Order pronounced in the open court 02/06/2017 Sd/- Sd/- (�या�यक सद�य) (लेखा सद�य) (N.V.Vasudevan) (Waseem Ahmed) (Judicial Member) (Accountant Member) Kolkata, *Dkp, Sr.P.S �दनांकः- 02/06/2017 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. आवेदक/Assessee-Jamna Das Kothari (HUF), Prop. of Sukhdeodas Jamunadas Ranchi Road, Purulia-723101 2. राज�व/Revenue-ITO, Ward-3(3), P.O. Purulia, South Lake Road, P.O Purulia,723101 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड� फाइल / Guard file. By order/आदेश से, /True Copy/