Income Tax Appellate Tribunal - Kolkata
Bina Cement Works, Kolkata vs Department Of Income Tax on 16 September, 2009
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH : KOLKATA
[Before Hon'ble Sri D. K. Tyagi, JM & Hon'ble Sri C. D. Rao , AM]
I.T.A. No.354Kol/2010
Assessment Year: 2006-07
Income-tax Officer, Wd-53(1), Kolkata. -Vs- M/s. Bina Cement Works
(Appellant) (Respondent)
&
I.T.A. No.37Kol/2010
Assessment Year: 2006-07
M/s. Bina Cement Works -Vs- Income-tax Officer, Wd-53(1), Kolkata
(PA No.AAGFB 1951 P)
(Appellant) (Respondent)
Appellant by : S/Sri Soumitra Chowdhury/T. K. Chakraborty
Respondent by : Sri Neeraj Singh
O R D E R
Per D. K. Tyagi, JM:
These appeals preferred by the revenue and the assessee respectively are directed against the order of the Ld. CIT(A), Kolkata dated 16.09.2009 for assessment year 2006-07. For the sake of convenience both these appeals have been heard and disposed of together by this consolidated order.
2. The revenue has taken the following grounds of appeal :
"1. The Ld. CIT(A) has erred both in law and in fact by estimating business income at Rs.12,73,563/- whereas the assessee has disclosed business income of Rs.49,45,673/-.
2. The Ld. CIT(A) has erred both in law and in fact by estimating the business income whereas the assessee has failed to produce/submit books of accounts."
3. The assessee has taken the following grounds of appeal :
"1. For that the Ld. CIT(A) erred both in law and in fact by confirming estimated net profit to the extent of Rs.12,73,563/- as against Rs.1,80,780/- disclosed by the appellant without any basis and/or reasons.
2. For that the Ld. CIT(A) erred both in law and in fact by confirming the addition of a sum of Rs.7,08,007/- under the head of undisclosed income on account of increase in partner's capital and decrease in sundry creditors and other liabilities without appreciating actual facts of the case."
At the of hearing before us the assessee has also taken the following additional ground :
2"For that the Ld. CIT(A) failed to consider the partners remuneration paid by the appellant firm and the respective partners also paid tax thereon in their respective files, to allow the same in comprising the net profit of the firm."
4. The revenue has agitated against the action of the Ld. CIT(A) in estimating the business income of the assessee at Rs.12,73,563/- whereas the assessee has disclosed business income of Rs.49,45,673/-. Facts of the case are that the assessee, along with the return of income submitted 7 TDS certificates. 6 TDS certificates related to contract services having total contract income of Rs.61,81,076/-. The 7th certificates related to rental income of Rs.3,60,000/-. The AO, however, found that the gross receipt of the assessee were only Rs.20,90,868/- and this included Rs.12,20,316/- as service charges and Rs.1,90,474/- as godown rent declaring net profit of Rs.4,05,465/-. The assessee was required to reconcile the discrepancy in respect to which the assessee filed fresh audited account wherein he included new heads of income and also increased its claim of expenditure. Comparison of the original account and the revised account is given on page 2 of the assessment order, AO found that expenses claimed in the revised account were substantially higher. He, therefore, directed the assessee to produce the books of accounts for verification of its claim. The A/R of the assessee submitted statement of lorry hire charges and labour charges supported with photocopy of vouchers. Since the books of accounts were not produced the AO was of the opinion that two separate accounts had been prepared by the assessee for the same financial year. He considered the gross receipt as mentioned in the TDS certificate and allowed expenses to the extent claimed in the original return and determined the profit from business at Rs.49,45,673/-. Excess claim was not entertained as it was not supported by proper documents and books of account and also for the fact that the claim of excess deduction was not made by filing of revised return of income. In appeal, the Ld. CIT(A) directed the AO to take Rs.12,73,563/- as business income of the assessee as against Rs.49,45,673/- determined by him and allowed the assessee's appeal partly. The assessee is also aggrieved by the action of the Ld. CIT(A), who in appeal confirmed the estimated net profit to the extent of Rs.12,73,563/- as against Rs.1,80,780/- disclosed by the assessee. The assessee further aggrieved by the action of the Ld. CIT(A) in confirming the addition of a sum of Rs.7,08,007/- under the head of undisclosed income on account of increase in partner's capital and decrease in sundry creditors and other liabilities. Aggrieved by the said order, now the revenue as well as the assessee is in appeal before us.
33. At the time of hearing before us the Ld. DR relied on the order of the AO and submitted that the AO has rightly estimated the business income of the assessee at Rs.49,45,673/- as the assessee has failed to produce/submit books of accounts. He, therefore, urged before the bench to set aside the order of the Ld. CIT(A) and restore that of the AO.
4. On the other hand, the Ld. Counsel for the assessee while reiterating his same submissions as submitted before the lower authorities further submitted that the Ld. CIT(A) without any basis or reasons confirmed the estimated net profit to the extent of Rs.12,73,563/- as against Rs.1,80,780/- as disclosed by the assessee. He also submitted that some errors had occurred becauswe the accountant had left the services, which led to wrong preparation of accounts. The AO arrived at wrong conclusion in determining of income of the assessee it was within the power of the appellate authority to correct the error in the way most suitable in the circumstances of the case. He also submitted that the AO considered the turnover as reflected in the TDS certificate but did not allow any expenses against the increased turnover, He also argued that the income determined by the AO is absurd. He, therefore, submitted that the profit margin may be determined keeping profit margin which could accrue in his line of business. He, therefore, urged before the bench to accept the net profit as disclosed by the assessee at Rs.1,80,780/-. After hearing both the parties the additional ground was admitted. Since the facts are already on record and which were also available before the lower authorities and it is going to the root of the matter, the additional ground is admitted for hearing.
5... We have heard the rival submissions and perused the material available on record. We find that the Ld. CIT(A) has dealt the issue as under :
"I have gone through the observations of the Assessing Officer submission of the A/R and the both Profit & Loss Account of the assessee i.e. original and revised statement. There is some truth in the in the explanation of the assessee that not allowing any expenses against enhanced turnover leads to absurd profit. At the same time it is true that the assessee did not substantiate it's claim of increased expenses mentioned in the revised Profit & Loss Account. The profit increase shown by the assessee after incorporating the full turnover was a paltry Rs.15, 000/- when the turnover increased from Rs.20,90,868/- to Rs.59,54,035/- in the revised statement. The income as submitted by the Assessee in the revised statement in not acceptable as it is unsupported. The stand of the A.O in adding the total turnover is also not correct. In absence of Books of Accounts and proper documentation and unreconciled turnover, the income of the Assessee is required to be estimated. The income estimation is done as under:
3.3. Estimation of Income:
Revised statement submitted by the assessee suffers from infirmity in that its accounts for turnover of only Rs.59,54,035/- whereas TDS Certificate show the turnover at 4 Rs.66,31,076/-. The assessee has not been able to reconcile the difference in turnover even before me and therefore the turnover as per TDS Certificate is to be considered for determination of income. The comparison of the different incomes streams in the original and revised statement given a picture as shown in the Annexure-A. The different revenue streams having additional turnover would result in additional profit to the assessee. Additional profit on additional turnover has been determined by considering profit on account of labour @ 8%, profit on account of lorry hire and other service charge @ 15%. Additional profit on godown rent has been considered at 100% as it is considered that no additional expenses over and above expenses already debited in the original Profit & Loss Account would be required to earn this income. The difference between TDS and revised statement is on account of service charges and therefore profit on this is also taken @ 15%. This gives total additional income on account of un-recorded turnover at Rs.8,68,098/- which together with the profit as disclosed in the original Profit & Loss Account gives the business income of the assessee at Rs.12,73,563/-. The Assessing Officer is directed to take this as the business income of the assessee as against Rs.49,45,6731- determined by him. This ground of the assessee is partly allowed."
At the time of hearing before us, both the representatives of assessee and the revenue did not controvert the aforesaid findings of the Ld. CIT(A) by producing any cogent material/evidence. Hence, in the absence of any material, we do not find any infirmity in the order of the Ld. CIT(A) and the same is hereby upheld. The appeal of the revenue and ground No. 1 of the assessee's appeal are dismissed.
6. In respect of ground No. 2 and the additional ground of the assessee's appeal, facts of the case are that the AO added a sum of Rs.7,08,007/- as undisclosed income of the assessee on account of increase in partners capital and decrease in sundry creditors and other liabilities by observing that in the revised statements the sundry creditors liabilities was reduced by Rs.3,89,908/- and other liabilities reduced by Rs.2,80,950/- when compared to original statement filed along with return. He also observed that partners capital had increased by Rs.37,149/-. The AO considered the reduction in the revised computation in the liabilities of the assessee as undisclosed income and made an addition of Rs.7,08,007/-. In appeal, the Ld. CIT(A) confirmed this action of the AO. Aggrieved by the said order, now the assessee is in appeal before us.
7. At the time of hearing before us, the Ld. Counsel for the assessee while reiterating his same submissions as submitted before the lower authorities further submitted that
8. We have heard the rival submissions and perused the material available on record. At the time of hearing before us the Ld. Counsel for the assessee did not produce any material/evidence to controvert the findings of the Ld. CIT(A). For the sake of brevity, relevant portion of his order reproduced below :
5"I have gone through the statements of accounts, both original and revised. It is seen that the Sundry Creditors liabilities for other expenses are shown at reduced figure in the revised statement as compared to the original. It is however also seen that Sundry Debtors in the revised statement is also reduced and so has the cash in hand. The Sundry Debtors are shown as having been reduced from Rs.5,09,650/- to Rs.90,000/- and cash in hand from Rs.1,23,663/- to Rs.18,175/-. TDS is also shown at different figure. From the above it appears that balancing figure have been placed against different assets and liabilities in the Balance Sheet both in the original statement as well as in the revised statement. However it is to be kept in mind that once Sundry Creditors or expenses for liabilities are determine for the business, it is not possible to have them at reduced figure unless there is commonality in the debtors and the creditors. Only the other possibility is that creditors have been paid out of undisclosed sources. The assessee has not shown that there were contra entries between debtors and creditors. Therefore it will have to be presumed that the payments to creditors were made out of undisclosed sources of the assessee. The addition is therefore confirmed. This. ground of the assessee fails."
In view of the above, we do not find any infirmity in the order of the Ld. CIT(A) and the same is hereby upheld. This ground of appeal of the assessee is also dismissed.
9. After hearing both the parties the additional ground taken by the assessee was admitted and the matter is restored to the file of the Ld. CIT(A) for adjudication.
10. In the result, the appeal of the revenue is dismissed and the assessee's appeal is partly allowed for statistical purposes.
10. The order is pronounced in the open court.
Sd/- Sd/-
(C. D. Rao) (D. K. Tyagi)
Accountant Member Judicial Member
Dated : 22nd April, 2010
Copy to :
1. M/s. Bina Cement Works, Amtala, Baruipur, Dist. 24 Parganas (S), PO Kanyanagar.
2. ITO, Ward-53(1), Kolkata.
3. CIT(A), Kolkata.
4. CIT, Kolkata.
5. D.R., ITAT, Kolkata.
True copy By Order
Deputy Registrar
Jd.(Sr.P.S.) I.T.AT., Kolkata