UJJAL KUMAR KUNDU,KOLKATA vs. ITO, WARD-3, ROURKELA, ROURKELA

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.

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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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.

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.

further appeal before the Tribunal.

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.

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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ld CIT(A) was not justified in adding back Rs.6,31,223/- being the capital

introduced.

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.

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.

of ld A.R. of the assessee.

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.

CIT(A) was not justified in confirming the addition of Rs.1,65,650/- on account

of agricultural income.

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.

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.

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