Income Tax Appellate Tribunal - Agra
A.C.I.T.-2, Agra vs M/S Raja Janmejay Automobiles, Auraiya on 19 November, 2017
IN THE INCOME-TAX APPELLATE TRIBUNAL,
AGRA BENCH, AGRA
Before: Shri A.D. Jain, Judicial Member And
Shri Dr. Mitha Lal Meena, Accountant
Member
ITA No. 189/Agra/2013
Assessment Year: 2005-06
ACIT-2, vs. M/s Raja
Agra Janmejay,Automobiles,
Jalaun,
Chauraha, Auraiya (UP).
(Appellant)
(Respondent)
Appellant by ShriInderjeet Singh, CIT DR
Respondent by Shri R.C. Tomar, ITP
Date of Hearing 23.10.2017
Date of Pronouncement 19.11.2017
ORDER
PER DR. MITHA LAL MEENA, A.M.:
1. This appeal by the Revenue is directed against the order of the learned CIT(A)-1, Agra for the Assessment Year 2005-06. The ground raised by Revenue reads as under:
"1. That the CIT (Appeals)-I, Agra has erred in law and facts by restricting the addition of Rs.18,25,591/- to Rs.2,95,330/- - by applying the net profit rate of 5% on turnover of ITA 189/Agra/2013 2 Rs.59.06,602/- without appreciating the facts of the case and since the provisions of section 44AF are not applicable in the case of the assessee.
2. That the learned CIT has erred in law and on facts by deleting the addition of Rs.13,70,707/- as worked out from the annexure LP-10 (wrongly mentioned as BK-10 in the assessment order) impounded from the business premises of the assessee, without appreciating the facts of the case.
3. That the learned CIT(A) has erred in law and on facts by deleting the addition of Rs.28,83,198/- as worked out from the annexure A-28 impounded from the businesspremises of the assessee, without properly appreciating the facts of the case.
4. That the appellant craves leave to add or delete or alter or modify any one or more ground(s) of appeal during the appellate proceedings.
5. That the order of the CIT(Appeals)-1, Agra being erroneous in law and on facts be set aside and that the order of the Assessing Officer be restored."
2.0 Briefly stated facts are that the assessment has been completed u/s. 143(3) on the basis of documents impounded during the course of survey u/s 133A, conducted at the business premises of assessee on 03.03.2005. The assessee firm came into existence w.e.f. 04.10.2004,during the financial year 2004-05 relevant to Assessment Year 2005-06 the year under appeal, in the status of AOP consisting of Shri Santosh Kumar Pandey and Shri Shridhar Pandey as its members. This case pertains to Pandey Group of Auraiya in which search seizure and survey was carried out on 03.03.2005. The ITA 189/Agra/2013 3 Assessing Officer hasassessed income at Rs.68,27,570/- as against returned income of Rs.94,010/-.
3.0 The apropos 1st ground, the department objection is regarding restricting the addition of Rs.18,25,591/- to Rs.2,95,000/- by applying the net profit rate of 5% on turnover of Rs.59,06,602/- without appreciating the facts of the case and since provisions of section 44AF are not applicable to the case of the assessee.
3.1 The ld. CIT(A) while giving relief to the assessee inter alia observed as under:
"9.6 In view of the above computation, I find that the total amount of the purchases as worked out by the present AO in the remand report is also more than what the AO, who has passed the assessment order, has worked out. Therefore, apparently, it is quite clear that the working of sales as well as purchases has not been made by the AO correctly during the course of passing of the assessment order and hence, while deciding this appeal, I have taken amount of sale and purchase as worked out by the AO in the remand report. Now, the question is to decide about the taxable income of the assessee(appellant). In the assessment order, the AO has decided working of the income of the assessee (appellant) just by taking difference of sale and purchase which does not appear to be correct method because other than purchases also, an assessee is required to make certain expenditure and this expenditure are required to be allowed to work out the taxable profit. Keeping in view such accounting principle, provision of section 44AF has been incorporated under the Income-tax Act for working out the taxable profit of an assessee who does not maintain the books of ITA 189/Agra/2013 4 account and for such assessee, a profit rate of 5% is prescribed to be applied on the total turnover. In the present case also, the assessee(appellant) has not maintained any books of account from which, the profit can be worked out as per the accounting principle. Therefore, the profit of the assessee(appellant) is also required to be estimated g in view the provision of Income-tax Act as provided in section 44AF by applying. the profit rate on the turnover as computed by the AO in the remand report. Therefore, agreeing with the argument taken by the Id.AR, the AO is directed to apply a profit rate of 5% on the total turnover of Rs.59,06,602/- computed by her after taking out the duplicate sale. After applying the profit rate of 5% on the actual sale of Rs. 59,06,602/-, total taxable profit of the assessee(appellant) would come to Rs.2,95,330/-. Therefore, the AO is directed to take taxable income of the assessee (appellant) at Rs.2,95,330/- instead of Rs.18,25,591/- worked out in the assessment order. In view of my above decision, the taxable income of the assessee(appellant) is confirmed to the extent of Rs.2,95,330/- instead of Rs.18,25,591/- worked out by the AO and Rs.94,010/- declared by the assessee and accordingly, ground no. 6 is partly allowed."
4. The ld. DR supported the assessment order contending that ld. CIT(A) has erred in law and facts by restricting the addition of Rs.18,25,591/- to Rs.2,95,330/- by applying the net profit rate of 5% on turnover of Rs.59.06,602/- without appreciating the facts of the case and since the provisions of section 44AF are not applicable in the case of the assessee. The ld. DR has disputed the working of computation of duplicate sales as reproduced in the order of ld. CIT(A) being done without any reference to the specific part of the remand report of such working. He contended that merely filing of contrary statement without ITA 189/Agra/2013 5 computation or working of profit or turnover of the assessee firm on the basis of theimpounded documents,statement of accounts and bank statement,or with the support of any corroborative evidences the CIT(A) cannotdelete the addition. Under these circumstances, ld. CIT(A) was not justified in restricting the addition by applying provisions of section 44AF of the Act in the case of the assessee. 5.0 The learned counsel for the assessee, reiterated its submissions made before the authorities below and submitted that the A.O. on page 11 has worked out actual sales as per annexure A2 to A6, A12, A19, A23, A25, A26 and A28 at Rs.39,60,150/- after verifying the sales in the annexures and excluding the duplicate sales in other registers.The assessee has not maintained any books of account and other statements. In the assessment, the profit has been worked out at Rs.18,25,591/- in place of Rs.94,010/- shown by the assessee. While working out the net profit at Rs.18,25,591/-, the A.O. has allowed deduction of Rs.27,44,490/- out of sales of Rs.45,70,081/- without giving any details or basis of deduction allowed at Rs.27,44,490/-. If A.O.'s working is taken into account the net profit worked out at Rs.18,25,591/- on total sales determined by him at Rs.45,70,081/-
ITA 189/Agra/2013 6 gives a rate of 39.95% which by any stretch of imagination is arbitrary. Applicability of Provisions of Sec. 44AF is not disputed by the A.O.The assessee went in appeal and the Ld. C.I.T. (A) vide para 9.6 has held that the working of sales as well as purchases has not been made by the A.O. correctly during the course of passing of the assessment order. In assessment order the A.O. has decided working of the income of the assessee just by taking difference of sales and purchase which does not appear to be correct method because other than purchases also an assessee is required to make certain expenditure and this expenditure are required to be allowed to work out the taxable profit. Keeping in view such accounting principle provision of sec. 44AF has been incorporated under the Income Tax Act for working out the taxable profit of an assessee who does not maintained the books of accounts and for such assessee a profit rate of 5% is prescribed to be applied on the total turnover. In the present case also the assessee has not maintained any books of accounts from which the profit can be worked out as per the accounting principle. Therefore, the profit of the assessee is also required to be estimated keeping in view the provision of Income Tax Act as provided in sec. 44AF by applying the net profit rate on the turnover as computed by the A.O. in the remand report.
ITA 189/Agra/2013 7 Therefore, agreeing with the argument taken by the A.R., the ld. CIT A) directed the A.O. to apply a profit rate of 5% on the total turnover of Rs.59,06,602/- computed.
6. We haveheard both the sides and perused the material on record. We find that the issue in question pertains to working of income from the documentsimpounded in the course of survey u/s 133A of the Act.The ld. CIT(A) noted the working of actual sales as clarified by Assessing Officer on the basis of seized document after deducting duplicate sales as under:
Annexure No. Total sales Sales recorded Actual sale (2 - 3) recorded being duplicate 1 2 3 4 A-2 191793 - 191793 A-3 504384 199731 304653 A-4 393289 21270 372019 A-5 891273 175354 715919 A-6 178111 - 178111 A-7 269779 153959 115820 A-12 24878 - 24878 A-19 9356 - 9356 A-22 130666 1100 129566 A-23 1813537 160785 1652752 ITA 189/Agra/2013 8 A-25 321062 5508 315554 A-26 - - -
A-28 1896181 - 1896181
A-29 0 - -
Total 6624309 717707 5906602
6.1 It is further noted by the ld. CIT(A) that Rs.27,44,490/- has been
deducted out of sales without any explanation of the expenditurein the assessment order. If the purchases of Annexures 26,29 &19 are added to the total purchase as worked out either by the present Assessing Officer in the remand report or the ld. CIT(A),the turnover will surpass the figure of turnover computed by the lower authorities. Therefore, apparently it is still not clear that how the working of income from the impounded/ seized documents have been made by the lower authorities because there is no mention about the entries pertaining to expenses and cash deposits in banks and how provisions of section 44AF are applicable in the case of the assessee in the absence of working of actual turnover of the assesseebased on corroborative documentary evidences impounded during the course of survey.Neither the ld. CIT(A) nor the AO in his remand report dated ITA 189/Agra/2013 9 10.02.2012 has mentioned the factum of working of turn over [Para 9.4, Page16, CIT(A)]. Merely asking the present AO and the assessee to give working of sale from seized documents without mentioning factum of content of the document in terms of sales, purchases, cash deposits in bank or cash expenditure, it cannotbe established that what inventories in the seized documents were unaccounted sales, unaccounted purchase, investment, bank deposits and business expenditure.
7. In the present case, before jumping on applicabilityof provisions of Section 44AF, it is necessary to ascertain the total turnover of the assessee with reference to corroborative documentary evidences impounded in the form of annexures and loose papersof the assessee firm in order to compute correct income of the assessee firm. In view of the above facts and circumstances and in the interest of justice, we deem it appropriate to remit this issue to the CIT(A) to decide afresh in accordance with law, after affording due and adequate opportunity of beingheard to both the sides. All plea in law, shall be available to the assessee. No doubt,the assessee, shall cooperate in the fresh proceeding before the CIT(A). Ordered accordingly.
ITA 189/Agra/2013 10 Ground No.2
8. The issue in the 2nd ground of appeal is related to deletion of Rs.13,70,707/- worked out from the annexure LP-10 impounded from the business premises.
9. The C.I.T. (A) has deleted the addition observing as under: -
"I have gone through the spiral pad LP-10 provided by the present A.O. on page No. 1 of this spiral pad, though the name of Raja Janmejay Automobiles is mentioned, however, on subsequent page the details recorded are not found to be relating to his tyre-tube and automobile parts business except to page nos. 14 & 15 in which some working relating to the amount received by the assessee on sale of tyres are mentioned. On page 14, total receipt of Rs.55,000/- and on page no. 15, total receipt of Rs.21,025/- has been mentioned. However, the details of sales of tyres have also been recorded by the assessee in the seized documents from A-2 to A-28 considered by the A.O. for working out the sale proceeds of the assessee. Therefore, such receipt recorded on page no. 14 & 15 of spiral pad can be very well considered to have been entered in the seized documents relating to sale proceeds of the business of the assessee and accordingly in my considered opinion no separate addition is required to be made in the case of the assessee on the basis of spiral pad LP-10 in which only two pages, the transaction relating to tyres are recorded. In view of the above difference in the findings of the A.O. who has passed the assessment order and the A.O. who has submitted the remand report as discussed above and after going through the spiral pad LP-10, as I have found that except the above mentioned two pages, no other page in this spiral pad are found to be related to the business of the assessee. I do not find it would be justified to make an addition of Rs.13,70,707/- in the income of the assessee."
ITA 189/Agra/2013 11
10. The Ld. DR contended that the C.I.T(A) has erred in law and on facts by deleting the addition of Rs.13,70,707/-as worked out from the annexure LP-10 (wrongly mentioned as BK-10 in theassessment order) impounded from the business premises of the assessee without appreciating the facts of the case.
10.1 The respondent ld. Counsel for the assessee supported the order of the ld. CIT(A), reiterating the submission made before him. 10.2 During the course of assessment proceeding, the assessee offered no explanation in compliance to the query of the Assessing Officer in respect of Rs.13,70,707/- as per spiral pad LP-10 and accordinglysame was added to the income of the assessee in the income of the year under appeal. The ld. CIT(A) noted that in the remand report,it was clarified that the addition of Rs.13,17,707/- was made on the basis of spiral pad LP-10, which has been wrongly mentioned BK-10, in the assessment order the Assessing Officer has also provided working of receipt and expenses. It is noted that in the assessment order, the AO has mentioned, the seized spiral pad as BK- 10 while the present Assessing Officer has mentioned it as LP-10 and no other seized documents has been found giving working of receipt of ITA 189/Agra/2013 12 Rs.16,76,901/- and expenses of Rs.3,06,194/-. The ld. CIT(A) has stated that as per working provided by the present Assessing Officer in the remand report on the basis of LP-10 to the total receipt of Rs.16,76,901/- and the total pity expenses of Rs13,70,707/- have been found and therefore, there was a difference of only Rs.2,16,394/- and not Rs.13,70,707/- has worked out by the Assessing Officer in the assessment order. It is also noted that the present Assessing Officer reported to CIT(A) that at page 1 of the spiral paid the name of Raja Janmejay Automobile has been mentioned. On subsequent pages the details recorded are not found to be related to tyres and automobile parts business except page 14-15 in which, some working relating to amount receipt by the assessee on sale of tyres are mentioned. He further observed that there is difference in the finding of the Assessing Officer who has passed the assessment order and Assessing Officer who has submitted the remand report. The ld. CIT(A) has not addressed the factum of the difference of receipt of Rs.2,16,394/- as per the working of the remand report of the AO as above. We also find that he has not discussed that how he has come to the finding that the subsequent pages of LP-10, where details recorded are not found to be related to assessee tyresor automobile parts business.Considering ITA 189/Agra/2013 13 the veracity of the evidentiary value of the impounded documents, this issue is restored to the CIT(A) to decide afresh considering the factum of impounded documents in accordance with law, on affording due and adequate opportunity of hearing to both the AO and the assessee. Ground No.3
11. The last ground is related to the addition of Rs.28,83,198/- as worked out on the basis of Annexure A-28 impounded from business premises of the assessee.
11.1 The Ld. CIT(A) granted relief to the assessee vide Para no. 7.3 of its order by observing as follows: -
"7.3 On the above argument taken by the Id. AR against the addition of Rs.28,83,198/- made on the basis of Annexure A- 28, the present AO in her remand report dated 10.02.2012 has submitted that the assessee has stated that the addition of Rs.28,83,198/- made by the AO as unexplained transactions on the basis of Annexure A-28 without giving proper opportunity to the assessee for offering explanation with regard to these entries and without considering his reply dated 21.12.2006, is not found correct as the assessee was given proper and adequate opportunity vide notice dated 24.11.2006 and the AO has also considered submission made by the assessee before him on 21.12.2006 before passing assessment order as is very clear from the para 7 & 8 on page no. 10 of the assessment order. In the remand report, the present AO has provided the working of receipt and payments as recorded in the loose papers of A-28 and as per working ITA 189/Agra/2013 14 given by the present AO, the total receipt is shown at Rs.18,96,181/- and total payment has been shown at Rs.14,14,742/- and thus, there is surplus of receipt as compared to the payment made by the assessee(appellant) which comes to a surplus of Rs.4,81,439/- [18,96,181 (-) 14,14,742] and since there is surplus of Rs.4,81,439/- as per the working as provided by the present AO on the basis of the entry made on the loose papers of Annexure A-28, the question of being any unexplained purchases as worked out by the AO in the assessment order at Rs.28,83,198/- does not arise and therefore, I do not find that the AO is justified in making addition of Rs.28,83,198/- in the assessment order on the basis of Annexure A-28 considering this amount as unexplained purchases and, therefore, I delete the addition of Rs.28,83,198/- as made in the assessment order on the basis of Annexure A-28 and accordingly, ground no.4 is allowed."
11.2. The ld. DR submitted that ld. C.I.T. (A) has erred in law and on facts by deleting the addition of Rs.28,83,198/- worked out as per annexure A-28 impounded from the business premises of the assessee without properly appreciating the facts of the case. He contended that the AO in Para 7 on page 10 of the assessment order discussed that these were papers by which the assessee has purchased goods, incurred expenses and made investments and therefore the assessee was required to substantiate all the transactions entered in annexure A-28 with source thereof, of the total amount involving Rs.28,83,198/-. Even,the present AO computed a ITA 189/Agra/2013 15 surplus of Rs.4,81,439/- on the basis of loose paper annexure A-28 which remain unaddressed by the ld. CIT(A).
11.3 The ld. counsel for the assessee submitted that the C.I.T. (A) while deleting the aforesaid addition has considered the remand report submitted by the A.O. The C.I.T. (A) has held that the A.R. has pointed out that the total of receipt and expenses as made by the A.O. in the assessment order is wrong and the same does not tally with the actual figures as recorded in A-28 and hence as per the working of the A.O., treating the entire total made on the basis of A-28 as unexplained is apparently wrong and deserves to be quashed and deleted.On the above argument taken by the Ld. A.R. against the addition of Rs.28,83,198/- made on the basis of annexure A-28, the present A.O. in her remand report dated 10.02.2012 has submitted that the assessee has stated that the addition of Rs.28,83,198/- made by the A.O. as unexplained transaction on the basis of annexure A-28 without giving proper opportunity to the assessee for offering explanation with regard to these entries and without considering his reply dated 21.12.2006, is not found correct as the assessee was given proper and adequate opportunity vide notice dated 24.11.2006 and the A.O. has ITA 189/Agra/2013 16 also considered submissions made by the Assessee before him on 21.12.2006 before passing assessment order as is very clear from the para 7 and 8 on page no. 10 of the assessment order. In the remand report the present A.O. has provided the working of receipt and payments as recorded in the loose papers ofA-28 and as per working given by the present A.O., the total receipt is shown at Rs.18,96,181/- and total payment has been shown at Rs.14,14,742/- and thus there is surplus of receipt as compared to the payments made by the Assessee which comes to a surplus of Rs.4,81,439/- (18,96,181 - 14,14,720) and since there is surplus of Rs.4,81,439/- as per the working as provided by the present A.O. on the basis of the entry made on the loose paper of annexure A-28, the question of being any unexplained purchases as worked out by the A.O. in the assessment order at Rs.28,83,193/- does not arise.
12. It is undisputed fact that annexure, A-28 contain loose papers wherein transaction of unexplained purchases, expenses and investment were noted by the assessee. It is seen that Assessing Officer made an addition of Rs.28,83,198/- on account of income from undisclosed sources on account of unexplained purchases, expenses ITA 189/Agra/2013 17 andinvestment based on Annexure No. A-28. The ld. CIT(A) sought clarification by remand report on working of receipt and payments on loose paper A-28. It was reported by the present Assessing Officer that the total receipts were shown at Rs.18,96,181/- and total payment were shown at Rs.14,14,742/-.Thus,he has computed surplus receipt of Rs.4,81,439/- as against Rs.28,83,198/- worked out by the Assessing Officer in the original assessment order. The ld. CIT(A) has deleted the addition of Rs.28,83,198/- without considering the factum of unexplained purchases as discussed and added as income from undisclosed sources to the income of the assessee in the assessment order. He has noteven considered the surplus receipt as per working in the remand report by the present AO. We are therefore of the considered opinion that ld. CIT(A) is not justified in deleting the addition of Rs.28,83,198/- without considering the core document on the issue and addressing the factum of the unexplained purchases and source thereof by a speaking order. Thus, this issue is also restored to the CIT(A) to decide fresh by speaking order after giving proper opportunity of being heard to both the parties. No doubt, the assessee shall cooperate in the fresh proceedings before the ld. CIT(A). All plea in law, shall be available to the assessee in the fresh proceedings.
ITA 189/Agra/2013 18
13. In the result, appeal of the Revenue is allowed for statistical purposes.
Order pronounced in the open court on 19/12/2017 Sd/- Sd/-
(A.D. Jain) (Dr. Mitha Lal Meena)
Judicial member Accountant Member
Dated: 19.12.2017
Aks/-(DOC)
Copy of order forwarded to:
(1) The appellant (2) The respondent
(3) Commissioner (4) CIT(A)
(5) Departmental Representative (6) Guard File By order Assistant Registrar Income Tax Appellate Tribunal Agra Bench, Agra ITA 189/Agra/2013 19 Date
1. Draft dictated / 16.11.2017 PS
2. Draft placed before author 18/12.2017 PS
3. Draft proposed & placed before the second member JM/AM
4. Draft discussed/approved by Second Member. JM/AM
5. Approved Draft comes to the Sr.PS/PS PS/PS
6. Kept for pronouncement on PS
7. File sent to the Bench Clerk PS
8. Date on which file goes to the AR
9. Date on which file goes to the Head Clerk.
10. Date of dispatch of Order.