NIRMITHI KENDRA,ALAPPUZHA vs. THE ACIT (OSD), ALAPPUZHA

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ITA 113/COCH/2020Status: DisposedITAT Cochin08 February 2022AY 2015-163 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that estimation of income is not permissible without rejecting the assessee's books of account, as the books were not found to be defective. The grounds related to the denial of Section 11/12A status were dismissed based on a coordinate bench's decision.

What were the facts?

The assessee, Nirmithi Kendra, appealed against the denial of Section 11/12A status and the estimation of income. The Assessing Officer (AO) assessed the assessee as an AOP and estimated 12% of gross receipts as income without rejecting books of accounts.

What were the issues?

Whether the assessee's status should be assessed as an AOP or an individual, and if income estimation is permissible without rejecting books of accounts.

Which sections of the Income-tax Act were involved?

Section 11,Section 12A,Section 12AA

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN

Before: Shri George Mathan, JM & Shri B.R. Baskaran, AM

For Appellant: Shri R. Krishnan, CA
For Respondent: Shri V. Roy Jose, CIT-DR
Hearing: 08.02.2022Pronounced: 08.02.2022

This is an appeal filed by the assessee against the order of the learned CIT(A), Kottayam in appeal No. ITA.10141/CIT(A)/KTM/2017-18 dated 23.01.2020 for AY 2015-16.

2.

Shri R. Krishnan, CA appeared on behalf of the assessee and Shri V. Roy Jose, CIT-DR appeared on behalf of Revenue.

3.

Assessee has raised the following grounds: -

“1. The Officers below were not justified in denying the appellant Sec. 11 r.w.s. 12A status and confirming the assessment made as an AOP. 2. So long as the exemption u]s. 12AA has not been withdrawn the assessment in the status as an AOP was not in order. 3. Atleast the status should have been directed to be assessed as Individual. 4. The estimation of Income without rejecting Books of Accounts was not in order. 5. The appellant having been consistently following a particular 2 M/s. Nirmithi Kendra system of Accounting receipts and payments and arriving at the net result, a deviation from such consistent system for this year alone lacks prudence and fair play.

6.

The Officers below also failed to appreciate the fact that the accounts have been audited u/s. 12(A)b of the I.T. Act and report in Form 10(B) filed.

7. For the above grounds and other grounds as may be raised at the time of hearing. Your appellant prays that the assessment made may be modified/reduced.”

4.

In respect of Ground Nos. 1, 2 & 3 it was fairly agreed by the learned A.R. that the issues were held against the assessee by the Coordinate Bench of this Tribunal in dated 26.10.2018. Consequently grounds Nos. 1 to 3 of the assessee’s appeal stand dismissed.

5.

In respect of Ground Nos. 4, 5 & 6 it was submitted by the learned A.R. that the issue was against the action of the learned CIT(A) in confirming estimation of 12 percentage of the gross receipts before meeting administrative expenditure. It was submitted by the learned A.R. that a scrutiny assessment has been done for ay 2009-10 on 15.12.2011 wherein the AO had adopted the net income as per Income & Expenditure Account as being liable to be brought to tax under the head income from other sources. It was the submission that for the relevant assessment year the AO changed the method of taxing the income of the assessee by adopting an average 12 percentage of the gross receipts to be the actual income before meeting the administrative expenditure accounted for in the Income & Expenditure Account. It was also the submission that the books of account of the assessee have not been rejected and the estimation has been done. It was the submission that such estimation is not permissible without rejection of books of account.

6. In reply the learned D.R. vehemently supported the order of the learned CIT(A). It was the submission that income varies from year to year and consequently the estimation done was correct.

7.

We have considered the rival submissions. A perusal of the assessment order in paras 4 & 5 clearly shows that the books of account of 3 M/s. Nirmithi Kendra the assessee have not been found to be defective and the books of account have not been rejected. Without rejecting assessee’s books of account estimation of income of the assessee is not permissible. Consequently estimation as done by the AO and as confirmed by the CIT(A) stand deleted. Grounds 4 to 6 are allowed.

8.

In the result, the appeal filed by the assessee is partly allowed.

Dictated and pronounced in the open Court on 8th February, 2022.

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