MOSTAK MOHAMMAD SHEIKH, MUMBAI v. ITO 14(2)(4), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH: MUMBAI BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO.3831/MUM/2010 (ASSESSMENT YEAR: 2005-06) SHRI MOSTAK MOHAMMAD SHEIKH 38-B 3RD FLOOR 80B PATWA CHAWL SHEIKH STREET ZAVERI BAZAR MUMBAI -400 000 ASSESSEE VS ITO-14(2)(4) EARNEST HOUSE MUMBAI -400 021 ....REVENUE PAN: BDCPS 8221 E ASSESSEE BY: SHRI BHUPENDRA SHAH REVENUE BY: SHRI RAVJIT SINGH ARNEJA O R D E R IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. CIT (A) PARTLY SUSTAINING THE ADDITION MADE BY THE A.O. FOR THE A.Y. 2005-06. 2. THERE IS DELAY IN FILING PRESENT APPEAL BY 6 DAYS. I HAVE HEARD THE PARTIES AND ALSO CONSIDERED THE REASONS GIVEN BY TH E ASSESSEE IN HIS AFFIDAVIT FOR CONDONING THE DELAY. AFTER GIVING MY ANXIOUS CONSIDERATION FOR CONDONING THE DELAY I DO HEREBY PERMIT TO COND ONE THE DELAY AND ADMIT THE APPEAL FOR HEARING. ITA 3831/M/2010 SHRI MOSTAK MOHAMMAD SHEIKH 2 3. THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE G ROUNDS:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (A) ERRED IN EST IMATING RECEIPTS FROM POLISHING CHARGES AT ` 1 26 000/- WITHOUT ANY BASIS AND COMPARABLE CASE. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEARNED COMMISSIONER OF INCOME TAX (A) ALSO ERRED I N OVERLOOKING SECTION 44AA WHICH ALLOWS SMALL PEOPLE NOT TO MAINTAIN BOOKS AS REQUIRED BY THE A.O. 4. THE FACTS RELEVANT TO DECIDE THE ISSUE ARE AS UN DER. THE ASSESSEE IS AN INDIVIDUAL WHO DOES THE JOB WORK OF THE GOLD SMITH AND DERIVES THE INCOME BY WAY OF A LABOUR CHARGES. THE ASSESSEE DE CLARED THE TOTAL LABOUR CHARGES AT ` 1 00 480/- IN THE PREVIOUS YEAR 2004-05 RELEVANT T O A.Y. 2005-06. THE A.O. ASKED THE ASSESSEE TO PRODU CE THE BILLS OR RECEIPTS IN RESPECT OF THE ABOVE LABOUR CHARGES DEC LARED BY HIM. THE A.O. HAS NOTED THAT THE ASSESSEE DID NOT PRODUCE AN Y BILLS OR VOUCHERS NOR HE HAS MAINTAINED ANY REGISTER OR DIARY FOR MAI NTAINING THE RECEIPTS OF LABOUR CHARGES. THE ASSESSEE CONTENDED THAT HE DOES THE POLISHING WORK OF THE GOLD AND HIS CLIENTS ARE VARIOUS OTHER GOLDSMITHS WHO PREPARES ORNAMENTS AND SEND TO HIM FOR POLISHING WO RK ON THE LABOUR CHARGE BASIS. HE FURTHER CONTENDED THAT HE RECEI VES LABOUR CHARGES IN CASH AND PER DAY ON AN AVERAGE HE GETS ` 100/- TO ` 250/-. THE A.O. WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND HE ESTIMATED THE RECEIPTS OF LABOUR CHARGES ON AVERAGE OF ` 400/- TO 500/- PER DAY AND ESTIMATED THE ANNUAL INCOME OF THE ASSESSEE AT ` 1 60 000/- AND ALSO DOES NOT GIVE ANY OTHER DEDUCTION CLAIMED BY THE AS SESSEE. THE ASSESSEE CHALLENGED THE ADDITION MADE BY THE A.O. BEFORE THE LD. CIT (A) AND LD. ITA 3831/M/2010 SHRI MOSTAK MOHAMMAD SHEIKH 3 CIT (A) WHO RESTRICTED THE ESTIMATION MADE BY THE A .O. AT ` 1 26 000/- AS AGAINST ` 1 60 000/-. THE LD. CIT (A) HAS GIVEN FOLLOWING R EASONS:- 6. I HAVE CAREFULLY CONSIDERED THE FACTS AND SUBMI SSIONS OF THE APPELLANT AND ALSO PERUSED THE ORDER OF THE A.O.. ADMITTEDLY THE A.O. HAS ESTIMATED THE LABOUR CHARGES RECEIPT O F APPELLANT ON AN AVERAGE OF ` 400-500 PER DAY AGAINST THE CLAI M OF THE APPELLANT OF ` 100-250 PER DAY. IT IS AN ADMITTED FACT THAT THE APPELLANT HAS ALSO DECLARED ITS INCOME FROM LABOUR CHARGES FOR POLISHING ON ESTIMATED BASIS ONLY THOUGH CLAIMED H AVING MAINTAINED A DIARY FOR CASH RECEIPTS BUT THIS WAS N EVER CLAIMED BEFORE THE AO. NEITHER THE ALLEGED DIARY O F CASH RECEIPTS IS PRODUCED BEFORE THE A.O. NOR DURING THE APPELLATE PROCEEDINGS. THE INCOME DECLARED BY THE APPELLANT IS THUS PURELY ON ESTIMATED BASIS. THEREFORE THERE IS NO SCOPE OF ANY VERIFICATION REGARDING THE CORRECTNESS OF INCOME DE CLARED BY THE APPELLANT. UNDER SUCH CIRCUMSTANCES CERTAIN A DDITION FOR WANT OF PROPER VERIFICATION IS JUSTIFIED. HOWEVER THE ADDITION ON ESTIMATING THE RECEIPTS AT AN AVERAGE OF ` 450/- PER DAY AGAINST THE CLAIM OF THE APPELLANT AT ` 175/- PER DAY IS CERTAINLY ON HIGHER SIDE. IN MY OPINION IT WOULD BE FAIR AND MEET THE END OF JUSTICE IF THE AVERAGE RECEIPT PER DAY IS RESTRICTED TO ` 350/- PER DAY. ACCORDINGLY THE A. O. IS DIRECTED TO DETERMINE THE INCOME OF THE APPELLANT AT ` 1 26 000/- AGAINST THE INCOME DETERMINED AT ` 1 60 000/- BY HIM AND DELETE THE DIFFERENTIAL AMOUNT OF ` 34 000/-. THE APPELLANT THOUGH THIS WOULD THUS GET PARTIAL RELIEF. NOW THE ASSESSEE BEING AGGRIEVED BY THE ORDER OF T HE LD. CIT (A) IS IN APPEAL BEFORE US. ITA 3831/M/2010 SHRI MOSTAK MOHAMMAD SHEIKH 4 5. I HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIE S AND PERUSED THE RECORDS. THE LD. COUNSEL SUBMITS THAT AS PER THE P ROVISIONS OF SECTION 44A THE ASSESSEE IS NOT REQUIRED TO MAINTAIN THE B OOKS OF ACCOUNT BECAUSE THE ASSESSEES TURNOVER IS MUCH BELOW THEN ` 10 LAKHS. HE FURTHER SUBMITS THAT ALONG WITH THE RETURN OF INCOM E THE ASSESSEE FILED THE BALANCE-SHEET AS WELL AS CAPITAL ACCOUNT. IT I S ARGUED THAT NOWHERE IT IS A CASE OF THE A.O. AS WELL OF THE LD. CIT (A) TH AT THE ASSESSEE HAS SHOWN ANY LOW DRAWING ETC. HE THEREFORE PLEADED FOR DELETING THE ENTIRE ADDITION. I HAVE ALSO HEARD THE LD. D.R. 6. ADMITTEDLY THE ASSESSEE HAS NOT MAINTAINED THE BOOKS ACCOUNT BUT HAS FILED THE PREPARED BALANCE-SHEET. IT IS SE EN THAT THE ASSESSEE IS MERELY DRAWING LABOUR WORK OF THE GOLDSMITHS EARNED THE INCOME. AFTER CAREFULLY CONSIDERING THE REASONS MENTIONED IN THE ASSESSMENT ORDER IN MY OPINION THERE IS BASE FOR THE A.O. TO ESTIMATE THE GROSS RECEIPT AT ` 400 TO 500/-. IN SAME WAY THE LD. CIT (A) HAS ALS O ESTIMATED THE LABOUR CHARGES MAY BE AT A LOWER RATE BUT SAME WERE NOT SU PPORTED BY ANY MATERIAL EVIDENCE. THE BALANCE-SHEET FILED BY THE ASSESSEE IS ON RECORD. MOREOVER AS PER THE PROVISIONS OF SECTION 44AA TH E TURNOVER OF THE ASSESSEE IS BELOW ` 10 LAKHS AND THE ASSESSEE IS NOT REQUIRED TO MAINT AIN THE BOOKS OF ACCOUNT. MOREOVER THERE IS NO BASE T O SUSTAIN THE ADDITION MADE BY THE LD. CIT (A). I THEREFORE DELETE THE ADDITION SUSTAINED BY THE LD. CIT (A) AND ALLOW GROUNDS TAKEN BY THE ASSESSEE . 7. IN THE RESULT ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 5TH FEBRUARY 2011. SD/- ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI DATE: 15TH FEBRUARY 2011 ITA 3831/M/2010 SHRI MOSTAK MOHAMMAD SHEIKH 5 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) 25 MUMBAI. 4) THE CIT 14 MUMBAI. 5) THE D.R. SMC BENCH MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T. MUMBAI *CHAVAN ITA 3831/M/2010 SHRI MOSTAK MOHAMMAD SHEIKH 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 07.02.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 07.02.2011 SR.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 SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER