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TMI Blog2019 (10) TMI 1126X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee were rejected by the AO, then he should have only estimated the profits of the assessee. We note that the turnover found in the impugned typed Balance Sheet and P L Account during survey was to the tune of ₹ 3,00,50,000/- and the sales incentive and sales commission was to the tune of ₹ 31 lacs and ₹ 15 lacs, so the total amounts comes to ₹ 3,00,50,000 + ₹ 31,00,000 + ₹ 15,00,000 = ₹ 3,46,50,000/-. Though the assessee had shown a GP of 4.35%, in the interest of both the parties, we enhance the same to 6% and thus the GP comes to ₹ 20,79,000/- and thus the assessee receives a relief of ₹ 49,31,830/-. Appeal of the assessee is partly allowed. - I.T.A. No. 759/Kol/2015 (Assessment Year: 2004-05) - - - Dated:- 27-9-2019 - Shri J. Sudhakar Reddy, AM And Shri A. T. Varkey, JM For the Appellant Shri Vigyaneshwar Nath Datta, Advocate For the Respondent Shri Sankar Halder, JCIT, Sr. DR ORDER Per Shri A.T. Varkey, JM This is an appeal preferred by the assessee against the order of Ld. CIT(A) 15, Kolkata dated 10.03.2015 for AY 2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. According to Ld. Counsel, the assessee had filed return of income on 20.10.2004, which was processed by the department u/s. 143(1) of the Act. Thereafter, a survey was carried out on 02.03.2005 and the survey report as well as certain papers (typed P L Account and Balance Sheet as on 31.03.2004) was impounded along with this documents were with the department and no action whatsoever was carried out for such a long time after the date of survey and the show cause notice was issued u/s. 148 of the Act proposing to reopen the assessment only on 04.11.2009 (after 4 years) which should not have been done without tangible material which has come in the possession of the AO. Since, according to Ld. AR, there was no tangible material the AO ought not to have reopened the assessment and for that he relied on the following orders: i) Ashok Kumar Tandon Vs. ACIT (2014) 34 ITR (Trib.) 381 (ITAT, Del.); ii) Debashis Moulik Vs. ACIT (2015) 370 ITR 660 (Cal); iii) Common Cause (A Registered Society) And Others Vs. Union of India Ors. (2017) 394 ITR 220 (SC); iv) ACIT Vs. Marvel Associates (2018) 92 taxmann.com 109 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 15 lakhs which was also not found to have been disclosed in the regular books of account. Based on these suppression of facts, the AO had reason to believe that income chargeable to tax had escaped assessment for AY 2004-05. We note that though the reopening has been carried out after four years, the proviso u/s. 147 of the Act would not come into play because the original assessment was only an intimation u/s. 143(1) of the Act. Since the reopening is based on material found and impounded during survey it does not lie in the mouth of the assessee to say that there was no material on the basis of which the reopening was carried out, therefore, we do not find any infirmity in the order of the AO to reopen the assessment which was an intimation u/s. 143(1) of the Act. The case laws referred to by the Ld. AR does not come to the rescue of the assessee because facts in these cases were different. Therefore, ground nos. 1 and 2 of the assessee stands dismissed. 8. Coming to the merits of the addition, the facts of the case as noted by the AO is that the assessee for the assessment year under consideration i.e. AY 2004-05 declared a total income of ₹ 6,220/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount. Taking note of the difference of ₹ 97,15,774/- the AO applied GP rate of 4.35% which was applied by the assessee during the year and AO calculated the gross profit at ₹ 4,22,636/-. Thereafter, the AO taking note that the assessee has not disclosed the commission and incentive received by it during the year under consideration (incentive of ₹ 31 lacs and commission of ₹ 15 lacs) was added. Thus ₹ 46 lacs was also added to the income of the assessee, so the total amount of ₹ 70,10,830/- was added as total income of the assessee. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who gave partial relief to the assessee i.e. in respect of addition of ₹ 46 lacs on the incentive and sales commission and restricted the addition to ₹ 35,20,693/-. Aggrieved, the assessee is before us. 9. After hearing the rival submissions, we note that based on the survey the case was reopened u/s. 147 of the Act based on a survey report prepared after survey u/s. 133A of the Act conducted at the business premises of the assessee on 02.03.2005. During the survey a typed Profit Loss Account and the Balance Sheet of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. CIT(A) cannot be countenanced, for the reason that the Ld. CIT(A) has misdirected himself and has made the extrapolation of the commission/incentive on the entire turn-over, whereas during survey it revealed only that the assessee has received from M/s Metro ₹ 31 lacs and ₹ 15 lacs. We note that the Ld. CIT(A) took note of the fact from the assessment records that the AO got the details of purchases made by the assessee from M/s. Metro Tyres Ltd. and the supplier has reported that it has made sales of ₹ 50,91,578/- to the assessee during FY 2003-04 and it has allowed a discount of ₹ 7,95,447/- to the assessee. The purchase returns in this case were ₹ 98,336/-. Thus on a net purchase of ₹ 49,93,242/- (₹ 50,91,578 ₹ 98,336 = ₹ 50,91,578- ₹ 98,336 = ₹ 49,93,242/-). The assessee received a discount of ₹ 7,95,447/- i.e. @ 16%. The same ratio of 16% if applied to the declared turnover of ₹ 2,03,34,226/- given a likely discount received at ₹ 32,53,476/- and if the figure of 16% is applied to the turnover mentioned in the typed sheet at ₹ 3,00,50,000/- likely discount/incentive comes to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urs, we rely on the order of the Hon ble Andhra Pradesh High Court in Indwell Constructions Vs. CIT (1998) 232 ITR 776 (AP), wherein the Hon ble High Court has held as under: The pattern of assessment under the Income-tax Act is given by section 29 which states that the income from profits and gains of business shall be computed in accordance with the provisions contained in sections 30 to 43D. Section 40 provides for certain disallowances in certain cases notwithstanding that those amounts are allowed generally under other sections. The computation under section 29 is to be made under section 145 on the basis of the books regularly maintained by the assessee. If those books are not correct or complete, the Income- tax Officer may reject those books and estimate the income to the best of his judgment. When such an estimate is made it is in substitution of the income that is to be computed under section 29. In other words, all the deductions which are referred to under section 29 are deemed to have been taken into account while making such an estimate. This will also mean that the embargo placed in section 40 is also taken into account. 11. We als ..... X X X X Extracts X X X X X X X X Extracts X X X X
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