ASHOK KUMAR PATRA,BHUBANESWAR vs. ITO, WARD-1(1), BHUBANESWAR

These are appeals filed by the assessee against the separate orders

of CIT(A)-2, Bhubaneswar, dated 13.10.2017, 24.10.2016 & 24.10.2016,

for the assessment year 2009-2010.

that the estimation of profit by applying rate of 7% on gross amount by the

CIT(A) is unreasonable and improper in the facts of the case as the profit

rate in this line of business would not be exceeded more than 2% on gross

amount.

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authorities and materials available on record. The undisputed facts of the

case are that the assessee derives income from interest and salary from

partnership firm “laxmi Stores’ and trading in grocery items. The assessee

filed the return of income on 25.9.2009 showing income of Rs.1,50,000/-.

The Assessing Officer observed that examination of bank accounts revealed

that there are deposits of Rs.38,50,121/- in the IndusInd Bank, Janpath,

Kharvela Nagar, Unit-3, Bhubaneswar Branch A/c No.0035N34923-001.

The assessee has also made deposits of Rs.43,89,500/- in the Kotak

Mahindra Bank, Bhubaneswar. The assessee was required to explain the

source of such deposits. Ld A.R. admitted that the assessee has carried on

retail trade of grocery items. Such business is outside the business of the

firm 'Laxmi Store'. The ld A.R. stated in writing that these deposits

represent sale proceeds of the retail business. Therefore, the Assessing

Officer inferred that the deposits are made out of sale proceeds of his

undisclosed business. He observed that the aggregate of two deposits is

Rs.82,39,621/-. He observed that the assessee does not maintain any

books of accounts and has not produced any bills and vouchers. Therefore,

the net profit is estimated @ 10% on such sale proceeds after considering

the expenses for carrying on such business. Hence, he estimated the net

profit at Rs.8,23,962/- and added the same as income from undisclosed

business.

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assessee held that the assessee has not contested the Assessing officer’s

observation that books of account and bills and vouchers were not furnished

during the assessment proceedings. Therefore, he upheld the decision of

the Assessing Officer to estimate the net profit. However, he observed that

the net profit @ 10% of the deposits in bank appears to be excessive and,

therefore, directed the Assessing Officer to compute the net profit at 7% of

the deposits of Rs.82,39,621/- and partly allowed the assessee’s appeal

before the Tribunal.

business, the net profit earned by the assessee is not more than 2% and,

therefore, the profit of the assessee should be estimated at 2%.

the assessee submitted that before the CIT(A), the assessee himself

admitted that the net profit in this line of business was 5% and now he

cannot turn around and say that the profit in this line of business is 2%.

He submitted that the order of the CIT(A) is quite reasonable and justified

in the facts and circumstances of the case of the assessee and, therefore,

same should be confirmed.

aggregating to Rs. Rs.82,39,621/- and the assessee was required to explain

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the source of the same by the Assessing Officer. The assessee submitted

that it was the sale proceeds of grocery business outside books of account.

The Assessing officer accepted the explanation of the assessee and

estimated the income from receipts of Rs.82,39,621/- at 10% of the total

receipts.

by applying the rate of 2%. Ld A.R. of the assessee miserably failed to

bring any cogent and positive material on record to show that the income

of the assessee from undisclosed grocery receipts will be 2% and not 7%

as estimated by the CIT(A). In the absence of any such material being

brought on record, I find no good and justifiable reason to interfere with

the order of the CIT(A), which is hereby confirmed and the ground of appeal

of the assessee is dismissed.

CIT(A) was not justified in confirming the levy of penalty under section

271(1)(c) of the Act of Rs.2,09,410/-.

authorities and materials available on record. In the instant case the

Assessing Officer found that the assessee had made deposit of

Rs.38,50,121/- in the IndusInd Bank, Janpath, Kharvela Nagar, Unit-3,

Bhubaneswar Branch and deposit of Rs.43,39,500/- in the Kotak Mahindra

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Bank, Bhubaneswar. The assessee admitted that the total deposits in two

banks aggregating to Rs.82,39,621/- was the sale proceeds from grocery

business outside the books of account. Therefore, the Assessing Officer

estimated the income by applying the rate of 10% as undisclosed business

income, which was reduced to 7% on appeal by the CIT(A). Thereafter,

the Assessing Officer issued notice u/s.271(1)(c) of the Act and levied

penalty of Rs.2,09,410/-

in the case of CIT vs. Sangrur Vanaspati Mills Ltd., 303 ITR 53 (P&H) and

submitted that the Hon’ble High Court has held that provisions of section

271(1)(c) are not attracted to cases where the income of an assessee is

assessed on estimate basis and additions are made therein. It was held

that when the addition had been made on the basis of estimate and not on

account of any concrete evidence of concealment, then the penalty was not

leviable.

applicable to the present facts of the assessee’s case. He submitted that

in the case of Sangrur Vanaspati Mills Ltd (supra), the Hon’ble High Court

observed that the addition made on account of low yield compared to earlier

assessment year of the assessee was made on estimate basis and,

therefore, the penalty was not exigible to the assessee u/s.271(1)(c) of the

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Act. He submitted that in the facts of the assessee’s case, the assessee

has admitted to the fact of concealment of business receipts from grocery

business from the department as they were not recorded in the regularly

maintained books of account of the assessee. He submitted that the

assessee was liable to penalty and the CIT(A) was justified in confirming

the same.

submissions of ld D.R.

that during the course of assessment proceedings, the assessee has clearly

admitted the fact of deposits made in two bank accounts aggregating to

Rs.82,39,621/- towards grocery business receipts are outside the regularly

maintained books of account of the assessee, when it was required to

explain the source of deposits in the bank account. Thus, the assessee has

admitted the fact of concealment of business receipts and evaded the

payment of tax on the income embedded in this receipts to the department.

Thus, there was clear concealment of income by the assessee and hence,

the assessee was clearly exigible to penalty for concealment of income

u/s.271(1)(c) of the Act. The decision of Hon’ble P&H High Court in the

case of Sangrur Vanaspati Mills Ltd (supra) relied on by ld A.R.of the

assessee is not applicable in the case of the assessee’s case inasmuch as

in that case, the facts were that the additions were made to the income of

the assessee on account of low yield as compared to yield shown by the

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assessee in earlier assessment years. In these circumstances, the Hon’ble

High Court observed that as the addition was made to the income of the

assessee on estimate basis, therefore, the assessee was not exigible to

penalty. Hence, I find no good and justifiable reason to interfere with the

order of the CIT(A), which is hereby confirmed and the ground of appeal of

the assessee is dismissed.

CIT(A) was not justified in confirming levy of penalty of Rs.25,000/-

u/s.271A of the Act.

authorities and materials available on record. In the instant case, the

undisputed facts of the case are that the Assessing Officer observed that

the turnover of the assessee from business was Rs.82,39,621/-. No reason

for non-maintenance of books of account was submitted and, therefore,

he levied penalty for non-maintenance of books of account u/s.271A of the

Act of Rs.25,000/-.

on the ground that no submissions were made before him.

assessee to explained the reason for non-maintenance of books of account

by the assessee. Hence, I find no good and justifiable reason to interfere

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with the order of the CIT(A), which is hereby confirmed and ground of

appeal of the assessee is dismissed.

Order pronounced in the open court on 26/05/2017 in the presence

of parties.

Sd/- (N.S Saini) ACCOUNTANT MEMBER Cuttack; Dated 26/05/2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Mr Pradeep Kumar Prusty, Plot No.V-38, Unit-IV, Market Complex, Bhubaneswar. 2. The Respondent. ITO, Ward -1(1), Bhubaneswar 3. The CIT(A)-2, Bhubaneswar 4. Pr.CIT-2, Bhubaneswar. 5. DR, ITAT, Cuttack Guard file. BY ORDER, //True Copy// SR.PRIVATE SECRETARY ITAT, Cuttack

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Date Initial 1. Draft dictated on 23/05/17 Sr.PS 2. Draft placed before author 23/05/17 (dictation pad has Sr.PS been enclosed along with original file) 3. Draft proposed & placed before the AM second member 4. Draft discussed/approved by Second AM Member. 5. Approved Draft comes to the Sr.PS/P Sr.PS/PS S 6. Kept for pronouncement on Sr.PS 7. File sent to the Bench Clerk Sr.PS 8. Date on which file goes to the H.C. 9. Date on which file goes to the SPS 10. Date of dispatch of Order.