Income Tax Appellate Tribunal - Indore
Saurabh Agrawal , Indore vs Assistant Commissioner Of Income Tax ... on 22 March, 2019
आयकर अपील य अ धकरण, इ दौर यायपीठ, इ दौर
IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCHE, INDORE
BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER
AND
SHRI MANISH BORAD, ACCOUNTANT MEMBER
IT(SS)A Nos.298 to 302/Ind/2017
Assessment Years: 2008-09 to 2012-13
Saurabh Agrawal ACIT, Central-1
531, Sudama Nagar बनाम/ Indore
Shiv Mandir Chowk,
Vs.
Indore
(Appellant) (Revenue)
P.A. No.AGTPG6488P
Appellant by Shri Anil Khandelwal, CA
Revenue by Smt. Ashima Gupta, CIT-DR
Date of Hearing: 13.03.2019
Date of Pronouncement: 22.03.2019
आदे श / O R D E R
PER KUL BHARAT, J.M:
This bunch of five appeals by the assessee against the order of Commissioner of Income Tax(Appeals)-III Indore Saurabh Agrawal dated 31/08/2017 pertaining to assessment years 2008-09 to 2012-13.
First we take up the assessee's appeal in IT(SS)ANo.298/Ind/2017 The assessee has raised following grounds of appeal:
"On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law in enhancing the income of appellant through no incriminating material was found and seized during raid u/s 132 relating to relevant year without making a proper case as to how AO was not justified in accepting the revised income of appellant. On the facts and in the circumstances of the case, the ld. CIT(A) erred in law in adopting 15% enhancement country to her own direction in the order that such enhancement to be made from A.Y. 2008-09 to A.Y. 2013-14
3. On the facts and in the circumstances of the case, the Learned CIT(A) erred in rejecting the revised income offered by the appellant during assessment proceedings."
2. Briefly stated fact are that search and seizure operations u/s 132 were carried out on the business as well as residential premises of the LCH Group of Indore including the assessee along with other concerns/business 2 Saurabh Agrawal associates on 04.10.2013. In pursuance to notice u/s 153A, the assessee filed his return of income declaring income of Rs. 1,06,260/-. The assessing officer considering the submissions and the material available on record estimated and disclosed income at Rs. 3,00,000/- in respect of the assessment under reference further the assessing officer also made addition ofRs.39,00,000/- in respect of the unexplained investment and therefore, assessed income at Rs.43,06,260/- against the returned income of Rs.1,06,260/-.
3. Against this the assessee has preferred an appeal before the Ld. CIT(A) who after considering the submissions partly allowed, the appeal thereby, the Ld. CIT(A) deleted the addition of Rs.39,00,000/- however, in respect of estimated undisclosed income same was enhanced by Rs.4,29,742/-.
4. Against this the assessee is in present appeal.
3Saurabh Agrawal
5. At the outset, ld. counsel for the assessee submitted that in all these appeals the effective ground is against enhancement of income made by Ld. CIT(A). Ld. counsel for the assessee submitted that the assessee is an agent in the Regional Transport Office at Indore. During the course of hearing Ld. counsel for the assessee reiterated the submissions as made in the written synopsis which is reproduced as under:
"Appellant Suarabh Agrawal is engaged in the business of an agent in the RTO (Regional Transport Office) at INDORE since last about 10 years. He is an income tax assessee, having filed his returns regularly from A.Y. 2008-09 to A.Y. 2010-11, declaring income from RTO Agency business.
Search operation U/S 132 were conducted on 04.10.2013 at his residential premises. During search 8 diaries relating to RTO business, other documents, cash Rs 1,96,830 and gold ornaments weighing 151 grams and silver coins weighing 200 grams, were found but not seized. Seizure of 8 diaries and other documents only was done. No other assets like cash, bank deposit and bank account etc. were found.
In compliance to the notices dated 06.06.2014 U/S 153A appellant filed returns for 6 years from AY 2008-09 to 2013-
14. Assesse did not maintain any regular books of accounts except the seized diaries regarding RTO agency work.4
Saurabh Agrawal Ld. AO completed assessment on 30.03.2016 u/s 153A for AY 2008-09 to 2013-14 and for AY 2014-15 u/s. 143(3) making heavy additions. Appellant got some relief in first appeal. However Ld. CIT(A) made enhancement u/s. 251(1)(a) for AY 2008-09 to 2012-13 which are challenged in these appeals.
GROUNDS OF APPEAL FOR A.Y. 2008-09 to 2012- 13 :
There are three common grounds for AY 2008-0 to AY 2012-13 as below :
1. " On the facts and in the circumstances of the case, learned CIT(A) erred in law in enhancing the income of appellant though no incriminating material was found and seized during raid u/s 132 relating to relevant year without making a proper case as to how A.O. was not justified in accepting the revised income of appellant."
2. "On the facts and in the circumstances of the case, the learned CIT(A) erred in law in adopting 15% enhancement contrary to her own direction in the order that such enhancement to be made from AY 2008-09 to AY 2013-14 every year."
3. "On the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the revised income offered by the appellant during assessment proceedings."
In respect of the above Grounds, we humbly submit as below :
1.1 Assessee is a self employed person and working as a small RTO Agent. He earns a small amounts from every job he attends on behalf of his customers. Calculation of his earning from every type of work for the period covered were noted in the diaries pertaining to the period 12.12.2012 to 16.08.2013.
1.2 Given below is a summary of Income shown in regular returns, in returns filed U/S 153A on 02/09/2014, income 5 Saurabh Agrawal revised during the course of assessment proceedings, income assessed by the AO and income enhanced by Ld. CIT(A) :
A.Y. Income Revis Asse Income
returned u/s. ed income ssed by assessed by
139 and offered A.O. Ld. CIT
u/s 153A during (Column 2 Appeals
assessment + 3, in-
stead of 3
alone)*
1 2 3 4= 5
(2+3)
2008-09 1,06,260 3,00,000 4,06,260 729742
2009-10 1,39,370 3,60,000 4,99,370 839204
2010-11 1,34,950 4,20,000 5,54,950 965085
2011-12 1,59,980 4,80,000 6,39,980 1109847
2012-13 1,78,460 5,40,000 7,18,460 1276325
* Only the income disputed before Hon. Bench is shown.
Additions of Rs. 3900000 and Rs. 1470000 in AY 2008-09 and AY 2012-13 respectively deleted in first appeal are excluded.
1.3 Assessment by Ld. AO : During the assessment proceedings u/s. 153A, appellant revised his income at the amount as shown in column 3 above. However, Ld. AO did not adjust the income already offered in the returns submitted (as per column 2) and he assessed the revised income so offered as the additional undisclosed income. Ld. AO based the additions stating the quantum of investments in properties which later on proved to be incorrect as Ld. CIT (A) deleted the addition of Rs. 39 Lakh so made in AY 2008-09. Thus the very basis of addition proved to be wrong.
1.4 Ld. A.O. also wrongly concluded that since the appellant has not shown correct source of his income so he taxed the revised income offered as income from undisclosed source. It is pertinent to note that Ld. A.O. never disputed the source of income of assessee at any time during the entire assessment proceedings. The source of income of appellant is well settled and established in all the previous returns which 6 Saurabh Agrawal are on record as well as in the diaries seized from him. Ld. A.O. acted in a whimsical manner and added this amount as income from undisclosed source. Appellant had no business income other than RTO agency business. So the conclusion of Ld. A.O. is perverse and contrary to facts and records.
2.1 Enhancement by Ld. CIT (A) :
It is humbly submitted that no incriminating material was found during course of search proceedings pertaining to these five years. Since AO could not disturb the income for these years, so Ld. CIT also could not do . Therefore enhancement by Ld. CIT (A) is illegal and bad in law.
We rely on the following decisions :
a. CIT vs Sinhghad Technical Education Society (2017) 397 ITR 344 (SC) b. CIT V/S Mechmen (2015) 26 ITJ 93 (MP) c. LMJ International Ltd V/S DCIT 119 TTJ 214 (Kol) d. Anant Steel Private Limited V/S asst. CIT (2016) 28 ITJ 47 (Tribunal Indore) e. Dy. CIT V/S Kalani Brothers (Indore) Pvt. Ltd.
(2016) 27 ITJ 286 (Trib. Indore) f. Mukesh Sangla HUF v/s Dy. CIT (2016) 27 ITJ 172 (Trib. Indore) g. J.C. Sharma & Sons v/s Asst. CIT (2015) 26 ITJ 740 (Trib. Indore) h. Asst. CIT v/s Tikamchand Agrawal (2015) 25 ITJ 647 (trib. Raipur) i. Rawal Das Jaswani v/s Asst. CIT (2015) 25 ITJ 55 (Trib. Raipur) Appellant requested before Ld. CIT (Appeals) to restore the revised income as per column no. 3 above in place of as shown in column 4. However, Ld. CIT(A) hold the view that there would have been an increase in gross income @15% and accordingly hypothetically calculated the income at higher level [PB Page 115-backside]. There is no basis for such arbitrary increase hence the same is bad in law in view of the fact that 7 Saurabh Agrawal no incriminating material was found to support such increase. Ld. CIT(A) did not give any reason as to why the income assessed by the Ld. AO was not correct.
2.3 Ld. CIT (A) did not make any proper case for enhancement of income such as any error, ommission or non consideration of material. She simply stated, "I am of the view it would be fair to take 15% increase in business every year...". Hence this increase is arbitrary.
2.4 Calculation of enhanced income is also arbitrary as CIT(A) has taken the base of appellant's income for AY 2013-14 which is not relevant.
3.1 The income returned by the appellant has not been adjusted in the assessed income both by the AO and Ld. CIT(A). As the income in the return is offered under the head "Business Income" which is the only source of income of the appellant, hence it obviously mean that the income offered during the course of assessment proceedings is income from business. Since the income was revised, it included returned income also.
In view of the above facts, it is humbly requested that the income offered by the appellant during the course of assessment proceedings (as per column no. 3) may kindly be restored, and oblige.
GROUND OF APPEAL FOR A.Y. 2013-14 {2013-14 Not heard on 13.03.2019} "On the facts and in the circumstances of the case, the learned CIT(A) erred in not accepting the income offered by the appellant by allowing expenses @ 20% instead of claimed @ 40% of gross receipts."
In respect of the above it is humbly submitted as under :
8Saurabh Agrawal
4.1 Given below is a summary of Income shown in regular returns, in returns filed U/S 153A on 02/09/2014, income revised during the course of assessment proceedings, income assessed by the AO and income enhanced by Ld. CIT(A) :
A.Y. Inco Revised Income Inco
me income offered Assessed by A.O. me
returned during and Remarks assessed
u/s 139 assessment by Ld. CIT
and Appeals
u/s
153A
1 2 3 4 5 5
2013-14 1,92,830 9,90,000 18,42, Gross 1467774
(Gross income 380 Income
16.50 lakh 16.50 lakhs
minus plus
expenses 6.60 returned
lakhs) income
4.2 During the course of assessment proceedings, appellant
accepted gross receipts of Rs.16.50 lakhs for the AY 2013-14 and after claiming estimated expenses @40% of gross receipts he offered income of Rs. 9.90 lakhs. However Ld. AO did not allow any expense and straightway added Gross Income of Rs.16.50 lakh in the assessment. Ld. CIT(A) considered that expenses would have been incurred but hold that 40% of gross receipts is not justified and hold that salaries, conveyance, mobile and stationery expenses would have been incurred and 20% only was considered as fair. CIT(A) did not agree that Commission Expenses were incurred as there was nothing on record that Commission has been paid. Accordingly expenses @ 20% of gross receipts were allowed as against 40% claimed in assessment.
4.3 It is humbly submitted that the details of payment of Commission were already there in the seized records and statements of the appellant. We draw kind attention to statement dated 25.02.2016 PB page no. 30 and 33 wherein appellant has stated having paid commission to various 9 Saurabh Agrawal persons named in diaries because those persons have referred RTO related work to the appellant. Ld. CIT(A) did not give opportunity to give explanation of Commission payment before rejecting the claim.
In view of the fact that the payment of commission to some persons whose names are mentioned in diaries and the same has been stated in the statement recorded which has not been contradicted by AO or CIT(A), no disallowance could have been made and estimated expenses @ 40% including commission should have been allowed.
6. Per contra Ld. Departmental Representative (DR) supported the order of the Ld. CIT(A) and submitted that there is no infirmity into the order of the Ld. CIT(A).
7. We have heard the rival submissions and perused the material available on records and gone through the orders of the authorities below. Ld. CIT(A) estimated the income by observing as under:
"6. After considering all the facts and circumstances of the case, I am of the view that the estimation of income has been correctly done on pro-rata basis on the entries found for the period 12/12/2012 to 16/08/2013. Taking the average of Rs.1,52,893/- p.m. the gross income for F.Y. 2012-13 can be estimated at Rs.18,34,718/-. However, I do not seen any justification in the appellant's claim of 40% as expenses especially as it is showing substantial expenditure on commission 10 Saurabh Agrawal for which there is no evidence placed on record. Considering the volume of work handled by the appellant on a daily basis as can be seen from the seized diaries, it is logical to accept that assistants would be required and expenditure incurred on phone calls, photocopy and conveyance etc. thus, I am of the view that 20% is a fair estimate of the expenses which more than covers the salaries, petrol and conveyance, mobile, stationary photocopy expenses estimated by the appellant himself during the assessment proceedings. The income for A.Y. 2013-14 on account of commission is therefore worked out to Rs.14,67,774/- after allowing 20% expenses from the gross income estimated at Rs.18,34,718/-.
6.1 It is seen that the appellant in its various submission has not given any concrete basis for working out the estimated income for the earlier years. I am of the view that it would be fair to take 15% increase in business every year from A.Y. 2008-09 to A.Y. 2013-14 which can be taken as the peak period of all the years as there is no evidence to show otherwise. Also i find that there is no justification for adjusting the income declared in the return filed u/s 153A against this estimated commission income on the basis of the seized diaries as the appellant has fialed to show that the income declared in the return includes this income. 6.2 During the appeal proceedings vide order sheet entry dated 16.08.2017 the appellant was asked to submit as to why income should not be enhanced u/s 251(1)(a) for A.Ys. 2008-090 to 2012-13. The appellant again relied on its submissions stating that 40% had been incurred as expenditure and did not make specific submissions regarding increase in business to be taken at 15% from A.Y. 2008-09 to 2014-15."11
Saurabh Agrawal
8. On the above finding of the Ld. CIT(A), it is noticed that the enhancement is made purely on the estimation basis and adhoc basis. For earning commission the assessee would have incurred expenditure. It cannot be presumed that no expenditure was incurred. After considering the totality of the facts and the material placed before us we set aside the finding of the ld. CIT(A) and restore that of the assessing officer on this issue. Thus addition of Rs.3,00,000/- is sustained the effective ground raised in this appeal is allowed as indicated herein above. Appeal of the assessee is partly allowed.
Now coming to the Assessee's appeal in IT(SS)ANos.299 to 302/Ind/2017
9. Both the parties submitted that facts and circumstances of the present appeals are identical to the facts and 12 Saurabh Agrawal circumstances of the appeal in IT(SS)ANo.298/Ind/2017.
Therefore, following the reasoning given in the above case, the present appeals are also allowed.
10. In the result, this bunch of five appeals of the Assessee in IT(SS)ANo.298 to 302/Ind/2017 are partly allowed.
Order was pronounced in the open court on 22.03.2019.
Sd/- Sd/- (MANISH BORAD) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER Indore; दनांक Dated : 22/03/2019 Patel, P.S/. न.स.
Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file.
By order Assistant Registrar, Indore 13