Krushna Chandra Patra, Dhenkanal v. ITO, Dhenkanal

ITA 48/CTK/2011 | 2005-2006
Pronouncement Date: 14-03-2011

Appeal Details

RSA Number 4822114 RSA 2011
Assessee PAN AKKPP3242R
Bench Cuttack
Appeal Number ITA 48/CTK/2011
Duration Of Justice 1 month(s) 25 day(s)
Appellant Krushna Chandra Patra, Dhenkanal
Respondent ITO, Dhenkanal
Appeal Type Income Tax Appeal
Pronouncement Date 14-03-2011
Appeal Filed By Assessee
Bench Allotted SMC
Date Of Final Hearing 14-03-2011
Next Hearing Date 14-03-2011
Assessment Year 2005-2006
Appeal Filed On 20-01-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (SMC) CUTTACK BENCH CUTTACK ( ) BEFORE . . HONBLE SHRI K.K.GUPTA ACCOUNTANT MEMBER. / ITA NO. 048/CTK/2011 / ASSESSMENT YEAR 2005 - 06 KRUSHNA CHANDRA PATRA PROP. M/S.MADHUSUDAN FILLING STATION AT: STATION BAZAR ROAD P.O./DIST. DHENKANAL PAN: AKKPP 3242 R - - - VERSUS - INCOME - TAX OFFICER WARD 2 DHENKANAL. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI P.C.SETHI AR / FOR THE RESPONDENT: / SHRI J.KHANRA DR / ORDER (SMC) . . SHRI K.K.GUPTA ACCOUNTANT MEMBER . THE ASSESSEE IS IN APPEAL AGITATING THE ADDITION BEING THE ESTIMATED GROSS MARGIN COMPUTED BY THE ASSESSING OFFICER IN HIS ORDER U/S.143(3). 2. THE ASSESSEE AGITATES THAT THE ASSESSING OFFICER HAVING FOUND NO DEFECT IN THE BOOKS OF ACCOUNT TO INVOKE THE PROVISIONS OF SECTION 145(3) RESORTED TO ESTIMATE THE GROSS MARGIN ON PETROL PUMP DEALER DEALING IN PETROL AND DIESEL AT 2.5% WITHOUT BRINGING ANY COMPARABLE CASE ON RECORD. THE ESTIMATE OF INCOME THEREFORE OUGHT TO HAVE BEEN TO THE BEST OF HIS JUDGMENT UNDER THE PROVISIONS OF SECTION 144 AND NOT 143(3). 3. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENTS SUBMITTED THAT THE ASSESSEE HAS FILED RETURN OF INCOME AT 1 26 600 ALONG WITH THE AUDITED ACCOUNTS AND AUDITORS REPORT BEING A DEALER IN PETROL AND DIESEL IN THE NAME AND STYLE OF MADHUSUDAN FILLING STATION. THE ASSESSMENT ITA NO. 048/CTK/2011 2 WAS COMPLETED U/S.14(3) WHEN THE ASSESSING OFFICER SOUGHT TO REVISE THE GROSS MARGIN DECLARED BY THE ASSESSEE AT 9 03 726 TO 1 39 420 ON ESTIMATION. THE ASSESSING OFFICER ALSO MADE AN ADDITION OF 93 007 ON ACCOUNT OF EXCESS LEAKAGE AND EVAPORATION RETURNED BY THE ASSESSEE. AGGRIEVED THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO TOOK COGNIZANCE OF THE ASSESSEES RETURN OF INCOME WHENTHE GROSS MARGIN COMPUTED AT 1.42% WAS INFLATED TO 2.5% BY THE ASSESSING OFFICER. THE LEARNED CIT(A) NOTED THAT THE GROSS MARGIN AS A RESULT OF PURCHASE SALES AND STOCK WHICH WERE FOUND FAULT BY THE ASSESSING OFFICER WAS NOT EXPLAINED AS RETURNED BY THE ASSESSEE. HE CONFIRMED THE ADDITION OF 2 35 694 BUT DELE TED THE ADDITION ON ACCOUNT OF LEAKAGE AND EVAPORATION LOSSES OF 93 007 HOLDING THAT THE GROSS MARGIN RETURNED BY THE ASSESSEE WAS LOW THEREFORE WAS NO REASON FOR THE ASSESSING OFFICER TO INFLATE THE SAME LINKING THE SAME TO TRADING RESULT BEING PURCHASE SALES AND STOCK. 4. THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT NOT A SINGLE ITEM HAS BEEN NOTED BY THE ASSESSING OFFICER TO REJECT THE BOOKS RESULT UNDER THE PROVISIONS OF SECTION 145(3). THE ESTIMATION HAS BEEN DONE ON PURE ASSUMPTION AND PRE SUMPTION EVEN WITHOUT BRING ANY COMPARABLE CASE ON RECORD. THE LEARNED CIT(A) OUGHT TO HAVE TAKE COGNIZANCE TO THE FACT THAT THE GROSS MARGIN IS THE RESULT OF PURCHASE SALES AND STOCK THEREFORE COULD NOT HAVE RESULTED IN ANY ADDITION ON ACCOUNT OF LEAKA GES AND EVAPORATION MISDIRECTED HIMSELF TO HOLD THAT THE ESTIMATION BY THE ASSESSING OFFICER WAS ON THE BASIS OF REJECTION OF BOOK RESULT. HE ARGUED THAT THE DIFFERENCE BETWEEN THE TURNOVER AS COMPUTED BY THE ASSESSING OFFICER AS RETURNED BY THE ASSESSEE A MOUNTS TO A MEAGER OF 3 000 WHICH WAS TAKEN CARE OF BY THE LEARNED CIT(A) IN VIEW OF THE FACT THAT THE ACCOUNTING OF LEAKAGE AND EVAPORATION IS BASED ON THE METHOD OF VALUATION OF CLOSING STOCK WHICH IS ITA NO. 048/CTK/2011 3 PHYSICALLY MEASURED ON THE DAY TO DAY ACCOUNT. HE POINTED OUT THAT ONCE TH E LEARNED CIT(A) AGREED TO THE PROPOSITION THAT WHEN PROPER BOOKS OF ACCOUNT ARE MAINTAINED ADDITION ON ACCOUNT OF EXCESS LEAKAGE AND EVAPORATION THEREFORE WOULD BE INAPPROPRIATE BUT DID NOT INDICATE AS TO HOW ESTIMATION AT 2.5% AS GROSS MARGIN WAS APPRO PRIATE WHEN THE NET RESULT BEING THE NET PROFIT WAS ACCEPTABLE TO THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT(A). FOR THIS PROPOSITION HE SUBMITTED A COMPILATION OF JUDGMENTS WHICH INDICATE THAT WITHOUT INVOKING THE PROVISIONS OF SECTION 145 THE ESTI MATION OF GROSS MARGIN WAS CONTRARY TO THE PROVISIONS OF THE I.T.ACT AND THEREFORE THE TURNOVER BEING REMAINED ACCEPTABLE THE INCOME THERE FROM BEING A DEALER IN PETROL COULD NOT EXCEED THE AMOUNT AS AGREED TO BY THE NATIONALIZED PETROLEUM COMPANIES. HE PRAYED THAT THIS ADDITION MAY ALSO BE DIRECTED TO BE DELETED. 5. THE LEARNED DR SUPPORTED THE ORDER OF THE LEARNED CIT(A) IN VIEW OF THE FACT THAT IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT THE PURCHASE SALE AND STOCK WERE TO BE TINKERED WITH WHEN HE OBSERVED THAT THE ASSESSEE HAD CLAIMED EXCESS LEAKAGE AND EVAPORATION WERE CONSIDERED BY THE LEARNED CIT(A) IN PROPORTION TO THE ESTIMATION OF GROSS MARGIN WHICH IS ACCEPTABLE IN THIS LINE OF BUSINESS. THERE WAS NO OCCASION TO INITIATE REJECTION OF BOO KS OF ACCOUNT U/S.145(3) FOR THE SIMPLE REASON THAT HE HAD CONSIDERED THE TURNOVER AS RETURNED BY THE ASSESSEE. HE PRAYED THAT THE ORDER OF THE LEARNED CIT(A) BE UPHELD. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. ON MY CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES I FIND FORCE IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THERE HAS TO BE A BASIS TO RESORT TO ESTIMATE THE GROSS MARGIN ITA NO. 048/CTK/2011 4 ONCE THE INCOME PORTION REMAINS CONSTANT .IT WAS NOT T HE CASE OF THE ASSESSING OFFICER THAT THE BOOK RESULTS WERE DEFECTIVE. HE PROCEEDED TO ESTIMATE 2.5% GROSS MARGIN AGAINST 1.42% DECLARED BY THE ASSESSEE. IT HAS BEEN CONSIDERED BY THE TRIBUNAL ON MANY OCCASIONS THAT THE PETROL PUMPS ARE GOVERNED BY COMMISS ION ON THE BASIS OF TURNOVER EVEN WHEN THE PRICE OF PETROL AND DIESEL ARE INCREASING THREE TO FOUR TIMES DURING THE YEAR. THE COMMISSION IS A PERCENTAGE WHICH IS DEFINITELY 2.5% AS HAS BEEN ESTIMATED BY THE ASSESSING OFFICER. OI FIND FORCE IN THE CONTENTIO N OF THE LEARNED COUNSEL OF THE ASSESSEE THAT EVEN A COMPARABLE CASE HAS NOT BEEN BROUGHT ON RECORD WHICH INDICATE THAT THE BOOK RESULTS HAVE TO BE REJECTED. THE SAVINGS GRACE TO THE ISSUE IN DISPUTE BEFORE ME THEREFORE HAS BEEN HIGHLIGHTED BY THE LEARNED CIT(A) BY GIVING PART RELIEF TO THE EXTENT THAT THE EVAPORATION LOSS WHICH IS AN ENABLE MECHANISM FOR CONSIDERATION OF REDUCING THE GROSS MARGIN BEING BASED ON PURCHASE SALE AND CLOSING STOCK IS ACCEPTABLE TO THE LEARNED CIT(A) TO THE EXTENT THAT HE DIREC TED THE ASSESSING OFFICER TO DELETE THE ADDITION OF 93 007 SUPPORTS THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ADDITION OF 2 35 694 HAS NO LEGS TO STAND ON. THE LEARNED CIT(A) HAS ACCEPTED THAT THE BOOKS OF ACCOUNT AND TRADING RESULTS RETURNED BY THE ASSESSEE ARE PROPER THEREFORE LEA VES NO ROOM FOR ESTIMATION OF 2.5% AS MADE BY THE ASSESSING OFFICER FOR THE ADDITION OF 2 35 694 WHICH AT BEST COULD BE INVOKING THE PROVISIONS OF SECTION 145(3) TO BE ADJUDICATED U/S.144.THE CASE LAWS SUBMITTED BY THE LEARNED COUNSEL IN A COMPILATION SUP PORTS THE PROPOSITION THAT RESORTING TO ESTIMATE BY THE ASSESSING OFFICER HAS TO BE ON A SOUND FOOTING WHICH THE LEARNED CIT(A) HAS GIVEN CREDENCE BY DELETING THE ADDITION OF 93 007 BEING THE LOSS ON ACCOUNT OF LEAKAGE AND EVAPORATION. THE CONFIRMATION OF 23 5 7694 THEREFORE IS BOUND TO BE DELETED. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE SAME. ITA NO. 048/CTK/2011 5 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 14 T H MARCH 2011 S D/ - ( . . ) (K.K.GUPTA) ACCOUNTANT MEMBER. ( ) DATE: 14 TH MARCH 2011 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : KRUSHNA CHANDRA PATRA PROP. M/S.MADHUSUDAN FILLING STATION AT: STATION BAZAR ROAD P.O./DIST. DHENKANAL. 2 / THE RESPONDENT: INCOME - TAX OFFICER WARD 2 DHENKANAL. 3 . / THE CIT 4 . ( )/ THE CIT(A) 5 . / DR CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY / BY ORDER [ ] SENIOR PRIVATE SECRETARY ( ) (H.K.PADHEE) SENIOR.PRIVATE SECRETARY.