Uttam Kumar Chatterjee, Kolkata vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH : KOLKATA

[Before Hon'ble Sri Rajpal Yadav, JM & Hon'ble Sri B.P.Jain, AM]

I.T.A No. 2032/Kol/2013 Assessment Year : 2009-10 Uttam Kumar Chatterjee -vs.- I.T.O., Ward-53(2) Kolkata Kolkata [PAN : AHFPC 8568 H) (Appellant) (Respondent)

For the Appellant : Shri K.M.Roy, FCA For the Respondent : Shri Saboorul H.Usmani, JCIT, Sr.DR

Date of Hearing : 07.05.2015 Date of Pronouncement : 08.05.2015. ORDER

Per Shri B.P.Jain, AM

This appeal of the assessee arises from the order of ld.CIT(A)-XXXIII, Kolkata dated 18.03.2013 for Assessment Year 2009-10.

2. The assessee has raised the following grounds of appeal :

"1. That the assessment order is illegal and arbitrary since relevant materials were not examined by lower authority.

2. That the addition to the income of Rs.647002/- upon estimation of net profit is arbitrary since books of account were never rejected by lower authorities.

3.That the lower authorities have erred in sustaining the difference in opening capital, in spite of positive confirmations for Rs.653276/-.

4. That without prejudice to above grounds, the additional profit estimated may be allowed to be set off against cash credit.

5. That appellant reserves right to raise, alter any of the grounds during hearing."

3. Ground Nos.1 and 5, being general in nature do not require any adjudication.

4. As regards ground no.2 the brief facts of the case as appearing from the order of AO are reproduced for the sake of convenience herein below :-

2 ITA No.2032/Kol/2013 Uttam Kumar Chatterjee A.Yr.2009-10 "It appears form the Profit and Loss Account of the assessee that the assesee earned profit of Rs.3,24,824/-. While his gross receipt from business was Rs.1,21,47,820/-. Therefore the percentage of profit was 2.67% over gross receipt. From the reading of the past three years records of the assessee it appears that the assesee carrying the same nature of the business as he earlier during the F.Y.2008-09 without any interruption. The assessee earning of profit in the preceding year to the preceding year 2008-09 is as follows :

Assessment Turnover Net Profit % of profit over Year gross turnover 2008-09 Rs.33,45,730/- Rs.3,10,692/- 31.06% 2007-08 Rs.24,93,535/- Rs.2,12,575/- 21.25%

Apart from it during the course of hearing of the assessment proceeding of course duty of the assessee was that he must have placed all his cards regarding each transaction on purchase and sale and others on the table of the Assessing Officer but the assessee failed to do so.

Therefore in combined reading of net Percentage of profit for the assessment years 2009- 10, 2008-09 and 2007-08, it appears that the assessee had shown very low percentage of profit. To this context he could not provide sufficient explanation or could not provide any Books of accounts in support.

Hence considering the average rate percentage of profit for the assessment year 2008-09 and 2007-08 the rate of percentage of profit for the assessment year 2009-10 is determined at 26.15% (31.06% for A.Y.2008-09 + 21.25% for A.Y. 2007-08/2). Therefore, at the rate of 26.15% percentage, net profit of the assessee comes to Rs.31,81,328/- for the assessment year 2009-10. In fact the assessee had shown less profit Rs.31,81,328/- (average net profit) - Rs.3,24,824 (net profit as per profit and loss account) = Rs.28,56,504. Now Rs.28,56,504 is as further profit added and charged to the income of the assessee."

4.1. The ld. CIT(A) on perusal of the assessment records observed that no books of account were produced for verification before the AO despite being requisitioned the same by the AO. In such a situation AO is empowered to invoke the provisions of section 145(3) of the Act. He accordingly on the basis of order sheet entry dated 20.12.2011 observed about non production of books of account by the assessee and thereafter AO resorted to estimate of Net profit. Therefore the arguments made by the ld. Counsel for the assesee before him that the AO has rejected the books of account in the absence of any defect being pointed out and that estimation of net profit was not permissible, was rejected. Accordingly the ld. CIT(A) therefore estimated the net profit rate at 8% as against 26.15% estimated by the AO vide page 6 of the order and accordingly AO was directed to reduce the additions accordingly.

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5. The ld. Counsel for the assessee made similar arguments as made before the ld. CIT(A) that AO has not rejected the books of account and assessment was completed u/s 143(3) of the Act. In the absence of rejection of books of account without pointing out any defects therein, the AO is not authorized to disturb the audited accounts on record and accordingly no estimation of profit can be made.

6. The ld. DR, on the other hand, relied upon the orders of both the authorities below.

7. We have heard the rival contentions and perused the facts of the case. On perusal of the order of AO, we find that there is no defect pointed out in the books of account and provisions of section 145(3) of the Act have been invoked to reject the books of account. As regards the order sheet entry as mentioned by the ld. CIT(A), the ld. DR has not produced before us the record for our perusal. In any case the AO has not invoked the provisions of section 145(3) of the Act and in the absence of the same the AO is not authorized to disturb the audited accounts and the net profit declared by the assessee. Accordingly there is no question of estimation of net profit and no addition can be made. Thus additions so made by the AO are directed to be deleted and the order of the ld. CIT(A) is reversed. Thus ground no.2 of the assessee is allowed.

8. As regards ground no.3 of the assessee, the brief facts of the case as appearing from the order of AO are reproduced for the sake of convenience herein below :-

"In combined reading of balance sheet for the assessment year 2008-09 and Assessment Year 2009-10, it appears that the assessee had capital as on 31.3.2008 Rs.4,56,253/- and as on 1.4.2008, the opening capital that is he had Rs.11,09,469/-. Therefore there remains a difference in capital Rs.6,53,276/- (Rs.11,09,469 - Rs.4,56,253/-) and ultimately it appears that the assessee possessed capital and certainly this amount was invested out of his undisclosed source. Hence Rs.6,53,276/- is being added and charged to income of the assessee as investment to business u/s 69 of the Income Tax Act, 1961. Penalty Proceedings u/s 271(1)(c) has been initiated separately on this issue."

8.1. The ld. CIT(A) confirmed the action of AO.

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9. The ld. Counsel for the assessee argued on similar lines as argued before the ld. CIT(A) and the ld. DR relied upon the orders of both the authorities below.

10. We have heard the rival contentions and perused the facts of the case. It was stated before the ld.CIT(A) by the ld. Counsel for the assessee that this is the first year of the assessee in which the assessee had maintained proper accounts. Upto the A.Yr. 2008-09 i.e. the preceding year return was filed under provision of section 44AF of the Act and there was no requirement of maintaining books of account. As a result balance sheet as on 31.03.2008 had not been prepared properly. In the impugned year the balance sheet has been prepared properly and the difference has been credited to the opening capital and debited to the debtors account. The assesse had submitted the balance sheet for the impugned year. This was not filed before the AO as an additional evidence u/s 46A of the IT Rules which was forwarded to the AO and the report was received. In the remand proceedings the assessee produced the addresses of the debtors to whom the notices u/s 133(6) of the Act were issued by the AO. But all the notices remained unreplied and one notice to Shri Sudam Chandra Das was returned by postal authority with the remark "addressee not known" . The assessee filed the copies of the reply of the debtors but it was found surprising by the ld. CIT(A) that not a single reply was received by the AO even after a lapse of one month being all the addresses in the same city. Though the AO in the remand proceedings required the details of the payments, copies of the bills, ledger account, bank statements and PAN etc but no such details were filed except a photo copy of the confirmation of balances from Debtors by the assessee. We concur with the views of ld. CIT(A) that according to the facts and the circumstances of the present case in the entirety and in the absence of any reply from the debtors to the AO, there is a difference in the closing capital of the preceding year and opening capital of the impugned year which remains unexplained. Therefore we

4 5 ITA No.2032/Kol/2013 Uttam Kumar Chatterjee A.Yr.2009-10 find no infirmity in the order of ld. CIT(A), who has rightly confirmed the addition made by AO. Thus ground no.3 of the assessee is dismissed.

11. As regards ground no.,4 of the assessee since ground no.2 has been allowed there is no question of additional profit to be set off against the cash credit. Accordingly ground no.4 is infructuous and the same is dismissed.

12. In the result the appeal of the assessee is partly allowed.

Order pronounced in the Court on 08.05.2015.

Sd/- Sd/- [ Rajpal Yadav ] [ B.P.Jain ] Judicial Member Accountant Member

Dated : 08.05.2015. [RG PS]

Copy of the order forwarded to:

1.Uttam Kumar Chatterjee, Flat-2, C/132/A Kanisha Appartment, Uppen Banerjee Road, Kolkata-700060.

2. I.T.O., Ward-53 (2), Kolkata

3. CIT(A)-XXXIII, Kolkata 4. CIT Kolkata.

5. CIT(DR), Kolkata Benches, Kolkata.

True copy By Order

Asstt.Registrar, ITAT, Kolkata Benches

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