Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, ‘B’ BENCH,KOLKATA
Before: Shri J.Sudhakar Reddy & Shri S.S.Viswanethra Ravi
This appeal by the Revenue is directed against the order dated 28-08-2014 of the Commissioner of Income Tax (Appeals), Jalpaiguri, for the assessment year 2011-12.
None appeared for the revenue. There is no petition for adjournment either. Though some departmental representatives were present in Court, there was no request for an adjournment. 1 Arjun Chettri Under these circumstances, we dispose of the case on merits after hearing the ld.AR for the assessee exparte qua the revenue.
The brief facts of the case are that that the Assessee is an individual and is engaged in the business of contractor, general order supplier and also has retail outlet of Petrol. The Assessee filed his return declaring a total income of Rs.9,65,293/- on 24- 11-2011. Scrutiny, notice u/s 143(2) was issued. In response to which, the books of account and relevant evidences were produced. The AO added an amount of Rs.67,32,811/- for not explaining negative cash balance and an amount of Rs.1,57,386/- by applying rate at 11.58% to the contract receipts as against the claim of at 8.83% vide his order dt:28-03-2014 u/s 143(3) of the Act.
Ground no’s 1 to 4 are relating to the addition of Rs.67,32,811/- made on account of negative cash balance in the 1) personal cash book of the assessee of Rs.49,12,468/-, 2) cash book of the proprietary concern of the assessee of M/s. Bharat Fuel Centre of Rs.14,91,050/- and 3) cash book for M/s. Arjun Chettri & Sons, a proprietary concern of Rs.3,29,293/-.
During the course of scrutiny proceedings, the AO found negative cash balance on examination of cash books of the assessee maintained in respect of in his personal capacity and of other two proprietary concerns i.e M/s Bharat Fuel Centre and M/s Arjun Chettri & Sons for an amounts of Rs.49,12,468/-, Rs.14,91,050/- and Rs3,29,293/- respectively totalling to Rs.67,32,811/-. According to AO, the Assessee did not offer any explanation. Hence, the AO added the same to the total income of the Assessee on the ground that the assessee has introduced unaccounted cash and this was used to meet various expenses recorded in the books and to make deposit in the bank.
In first appeal before the CIT-A, the Assessee contended that he carries out business through six proprietary concerns in the same premises and that the AO had examined the cash books of three concerns only. The Assessee also contended that there were sufficient cash balances in the books of other concerns and the AO did not take into consideration the same. The CIT-A directed the AO to examine all the six cash books together and arrived at a right decision. The relevant portion is reproduced herein below:
5.1. It is seen that, the assesse runs his business through six proprietary concerns. Theref ore, what is relevant for assessment of income are the books of account of the assesse as a whole and not the individual books of account of different proprietary concerns. The assesse maintains separate books of account for better management of his business but for Income Tax assessment what matters is consolidated books of account of all the businesses and other incomes. The AO is directed to examine the books of accounts of all the businesses together and see whether there is any negative cash balance when the cash books all the businesses are considered. The AO is directed to restrict the addition only to the negative cash found when the books of account of all the businesses are examined together.
6. The Ld.AR submits that the Assessee is ready to produce all the details before the AO and urged to remand ground no’s 1 to 4 to the file of AO for Arjun Chettri verification in terms of the directions given by the CIT-A in his impugned order.
Heard submissions of Ld.AR and perused the material available on record. It is an admitted fact that the AO examined the cash books belonging to only three concerns and whereas the Assessee contended that he has conducting his businesses through six concerns. It is clear from the order of AO that only three cash books were available on record in the scrutiny proceedings. In our view the finding of the ld. CIT-A at para 5.1 of his order extracted above is to be upheld. The only issue is whether the ld. CIT-A has the power to set aside the issue to the file of the AO for fresh adjudication. Such power has been withdrawn. Hence, the ld. CIT-A has no power to set aside the assessment to the file of the AO. But, as his finding is correct, we are our discretion and set aside the issue to the file of the AO. The AO shall follow the direction set out at para 5.1 of the ld. CIT-A’s order. Thus, ground no’s 1 to 4 are allowed for statistical purposes.
Ground no’s 5 and 6 relating to the made on account of applying the gross profit rate at 11.58% by the AO against the rate adopted the Assessee at 8.83%.
The AO on perusal of the audited accounts of M/s Bidya International the proprietary concern of Assessee found discrepancies in disclosing different net profit rate for the receipts of Rs.52,12,832/- and Rs.57,24,017/- received for the works in Sikkim and West Bengal respectively. The assessee disclosed net profit rate of 11.58% for Sikkim 4 Arjun Chettri and of 8.83% for West Bengal. The AO show caused the assessee as to why the rate of net profit adopted for the Sikkim State should not be applied for the receipts in West Bengal. For not giving explanation, he added the difference of Rs.1,57,386/- (11.58% of Rs.57,24,017 – 8.83% of Rs.57,24,017) to the total income of the Assessee. The CIT-A deleted the addition by observing that the addition was made on presumption. The relevant portion of which is reproduced herein below:
5.4 The assesse has executed works in Sikkim and out of Sikkim. For the works executed in Sikkim the NP is 11.58% whereas for the works executed in India outside Sikkim it is 8.83%. The AO without finding any defect in the books of account, has applied the NP of works in Sikkim to the works outside Sikkim. This addition is based on presumption only and therefore deleted.
The Ld.AR submits that the AO did not point out a mistake in the books which were audited and supported the order of CIT-A.
Heard Ld.AR and perused the record. It is rightly observed by the CIT- A that the AO on a presumption that the cost of material and labour are very high in Sikkim than in West Bengal and applied the same rate of net profit to the receipts obtained from West and it is, in our opinion not correct. We find that the AO made the impugned addition without any basis. Therefore, we find no infirmity in the order of CIT-A and accordingly, it is justified. Thus, ground no’s 5 and 6 raised by the appellant Revenue fail and are dismissed.
In the result, the appeal of the Revenue is partly allowed.
Order pronounced in the open court on 29-05-2017