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Income Tax Appellate Tribunal, CUTTACK ‘SMC’ BENCH,
Before: SHRI N.S SAINI
This is an appeal filed by the assessee against the order of CIT(A)-1,
Bhubaneswar, dated 30.10.2014, for the assessment year 2010-2011.
In Ground No.1 of the appeal, the grievance of the assessee is that the
ld CIT(A)was not justified in instructing the Assessing Officer to estimate the
business profit @ 3.5% of gross receipts as the nature of the business was
wholesale & retail in nature.
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I have heard the rival submissions and perused the orders of lower
authorities and materials available on record. Brief facts of the case are that
the assessee derives income from sale of eggs on wholesale and retail basis.
The Assessing Officer required the assessee to produce bills and vouchers in
respect of above purchases and sales expenses claimed in the profit and loss
account to justify his audited books of account. Since the assessee failed to
do so, the Assessing Officer rejected the books of account of the assessee and
estimated the net profit @ 5% of the total turnover of Rs.4,00,71,441/- and
arrived at an income of Rs.20,03,572/-. The assessee had disclosed profit of
Rs.4,11,089/-. Therefore, he made an addition of the differential amount of
Rs.15,92,483/- to the income of the assessee.
On appeal, ld CIT(A) estimated the income of the assessee by applying
the rate of 3.5% on gross receipts, which worked out to Rs.14,02,500/-,
thereby allowed relief of Rs.6,01,072/- to the assessee.
Being aggrieved by the said order of the ld CIT(A), the assessee is in
further appeal before the Tribunal.
Ld A.R. of the assessee at page 1 of paper book has filed a comparative
chart of profit shown and accepted in the case of the assessee in the past
years. As per the said chart, for the assessment year 2007-08, the profit
shown was 1.18%, for the A.Y 2008-09, the profit shown was 0.73%, for the
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assessment year 2009-10, it was shown 0.77%, for the A.Y. 2011-12, it was
shown 1.03% and for the assessment year 2012-13, it was shown 0.89%.
Hence, it was his prayer that in the year under appeal, the profit can be
estimated by applying 1.5% to the total turnover of the assessee.
On the other hand, ld D.R. supported the order of ld CIT(A).
I find that rejection of book results by the Assessing Officer by applying
the provisions of section 145(3) of the Act is not under challenge before me.
The assessee has challenged the net profit of 3.5% applied to the total sales
of the assessee. Ld D.R. has not disputed the rate of profit shown by the
assessee in the chart filed before me for the preceding and succeeding
assessment years in the case of the assessee. I am of the considered view
that after rejection of books of account of the assessee, the Assessing Officer
has to estimate the income of the assessee for which he cannot make a wild
guess. For estimating the income, the past accepted results of the assessee
is a guide in this matter. I find from the above chart of the assessee that the
net profit has been accepted ranging from 0.73% to 1.18%. I, therefore, find
the submission of ld A.R. of the assessee reasonable to estimate the net profit
of the assessee by applying the rate of 1.5% to the gross receipts of the
assessee. Therefore, I set aside the order of ld CIT(A) and direct the Assessing
Officer to estimate the income by applying the rate of 1.5% to the total sale
receipts of the assessee. Hence, this ground of appeal is partly allowed.
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In Ground No.2 of the appeal, the grievance of the assessee is that the
ld CIT(A) was not justified in adding back Rs.6,31,223/- being the capital
introduced.
I have heard the rival submissions and perused the orders of lower
authorities and materials available on record. The Assessing Officer observed
that during the year under consideration, the assessee has introduced capital
of Rs.6,31,223/- in his business. Since the assessee could not satisfactorily
explain the source of Rs.6,31,223/-, the Assessing Officer added the same
u/s.69 of the Act as unexplained investment in business of the assessee.
On appeal, ld CIT(A) confirmed the action of the Assessing Officer.
Before me, ld A.R. of the assessee pointed out from the balance sheet
of the assessee for the year under consideration that it has been shown in the
audited balance sheet in schedule under the head “capital suspense A/c.
(source of capital introduce) as under:
Utilisation of matured value of KVP : Rs.1,50,000 Utilisation of accumulated net agricultural income: Rs.3,50,000 Gift from relatives : Rs.1,00,000 Unutilized drawing from last year : Rs. 31,223 Total: Rs.6,31,223
He filed before me Xerox copy of Kisan Vikas Patra (KVP) purchased by the
assessee on 13.6.2004 of Rs.10,000/- each totaling to Rs.80,000/- and
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submitted that the assessee has received maturity amount of KVP after 5 ½
years of Rs.1,60,000/- during the year under consideration. He submitted
that out of Rs.1,60,000/-, Rs.1,50,000/- was invested in the assesse’s firm.
Further, he filed before me copy of return of income filed by the assessee for
assessment year 2008-09 and pointed out therefrom that the assessee had
shown agricultural income of Rs.1,28,160/-. Again he pointed out from 143(1)
processing of return of income under the Income tax Act for assessment year
2009-1010, the assessee had shown agricultural income of Rs.1,47,500/-. He
further pointed from the processing of return u/s.143(1) for assessment year
2010-2011 that the assessee had shown agricultural income of Rs.1,65,550/-
. It was his submission that out of this agricultural income aggregating to
Rs.4,41,210/-, the assessee had invested Rs.3,50,000/- in his business.
Further, he filed copy of return of income of his father Shri Dinabandhu Kundu
for assessment year 2010-2011 together with copy of balance sheet as on
31.3.2010 where he has shown gift of Rs.1,00,000/- to his son, the assessee
in the present case. He pointed out that he has shown income of
Rs.9,31,465/- during the year under consideration and has paid tax of
Rs.1,52,741/-. Hence, it was his submission that Rs.1 lakh gift received from
his father was invested in the firm as capital. Further, he pointed out from
the balance sheet for assessment year 2010-2011 that during the year under
consideration, the assessee has shown drawings of Rs.7,73,386/- as well as
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the assessee has earned net profit of Rs.4,11,089/-. He submitted that out
of this, the assessee has invested Rs.31,223/- as capital in the firm. Hence,
he submitted that the entire source of Rs.6,31,223/- being capital introduced
in the firm is explained and hence, the addition should be deleted.
On the other hand, ld D.R. could not controvert the above submission
of ld A.R. of the assessee.
I find force in the submissions of ld A.R. of the assessee that introduction
of Rs.6,31,223/- in the capital of the firm is fully supported by evidence in the
form of realization proceeds of KVP, agricultural income, gift from his father
and drawings during the year. The D.R. could not controvert the submission
of ld A.R. of the assessee. Therefore, I set aside the orders of lower authorities
and delete the addition of Rs.6,31,223/- and allow this ground of appeal.
In Ground No.3 of the appeal, the grievance of the assessee is that ld
CIT(A) was not justified in confirming the addition of Rs.1,65,650/- on account
of agricultural income.
I have heard the rival submissions and perused the orders of lower
authorities and materials available on record. The Assessing Officer observed
that the assessee has shown agricultural income of Rs.1,65,650/-. He
observed that no evidence was provided for acquisition of land and no
evidence was produced showing the annual income from the said land. In the
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absence of the same, he added agricultural income of Rs.1,65,650/- shown
by the assessee as income from other sources.
On appeal, ld CIT(A) confirmed the action of the Assessing Officer.
Before me, ld A.R. of the assessee pointed out from the return of income
for assessment year 2008-09 that the assessee had shown agricultural income
of Rs. 1,28,160 and for assessment year Rs. 1,47,500/-. In find that in the
immediately preceding assessment year i.e. 2008-09 & 2009-2010, the
agricultural income of Rs.1,28,160/- and Rs.1,47,500/-, respectively has been
accepted by the department. Hence, I find that there is no good and justifiable
reason not to accept the agricultural income of Rs.1,65,650/- during the year
under consideration as the same compares favourably with the agricultural
income shown by the assessee and accepted by the department in the
immediately preceding years. Therefore, I set aside the orders of lower
authorities and delete the addition of Rs.1,65,650/- made out of agricultural
income and allow this ground of appeal of the assessee.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 18/01/2017 in the presence of parties. Sd/- (N.S Saini) ACCOUNTANT MEMBER
Cuttack; Dated 18/01 /2017
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B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Ujjal Kumar Kundu, Daily Market, Durga Pandal, Rourkela 2. The Respondent. ITO, Ward-3, Rourkela 3. The CIT(A)-1, Bhubaneswar 4. CIT, Sambalpur 5. DR, ITAT, Cuttack 6. Guard file. //True Copy// BY ORDER,
ASST.REGISTRAR, ITAT, Cuttack