> v. Anil Kumar & Co.[R] , More Particularly Para 11 Thereof, Which Is Reproduced Hereunder Easy Reference

Digitally signed byBASALINGAPPASHIVARAJDHUTTARGAONLocation: HIGHCOURT OFKARNATAKA NC: 2024:KHC-K:746/WP No. 201053 of 2024 IN THE HIGH COURT OF KARNATAKA,KALABURAGI BENCH| DATED THIS THE 27 DAY OF SEPTEMBER, 2024 | BEFORE THE HON'BLE MR. JUSTICE SURAJ GOVINDARAJ;WRIT PETITION NO. 201053 OF 2024 (TIT)BETWEEN: AHMED HUSSAIN KALLURAGED ABOUT 42 YEARS12A, 12B, AK AGRO INDUSTRIESHYDERABAD ROAD _KIADB INDUSTRIAL AREAYADGIRI 585201ALSO AT ~NO.1-5-101 SHAHPURPET AREAYADGIR TOWNYADGIR-585701. _ PETITIONER (BY SRI. RAVI SHANKAR S.V., ADVOCATE) AND: 1DEPUTY COMMISSIONER OF INCOME TAXCIRCLE 1, GULBARGAGULBARGA-585101.CIRCLE 1, GULBARGAGULBARGA-585101. 2DNATIONAL FACELESS ASSESSMENT CENTREADDITIONAL/JOINT/DEPUTY /ASSISTANT COMMISSIONER.OF INCOME TAX/ INCOME TAX OFFICERINCOME TAX DEPARTMENT _MINISTRY OF FINANCEROOM NO.401 7 FLOOR E-RAMP |JAWAHARLAL NEHRU STADIUMDELHI-110003.ADDITIONAL/JOINT/DEPUTY /ASSISTANT COMMISSIONER.OF INCOME TAX/ INCOME TAX OFFICERINCOME TAX DEPARTMENT _MINISTRY OF FINANCEROOM NO.401 7 FLOOR E-RAMP |JAWAHARLAL NEHRU STADIUMDELHI-110003. RESPONDENTS (BY SRI.M. THIRUMALESH., ADVOCATE) THIS WRIT PETITION FILED UNDER ARTICLES 226 AND 27/7OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF.CERTIORARI OR DIRECTION IN THE NATURE OF A WRIT OF.CERTIORARI QUASHING THE ORDER PASSED U/SEC. 143(3) R.W.S_144B|DATED21.03.2024.BEARINGITBA/AST/S/143(3 )/202324/1063070238(1) ISSUED BY THE RESPONDENT NO.2 FOR THE|ASSESSMENT YEAR 2022-23 HEREIN MARKED AS ANNEXURE-A AND.ETC. THIS|WRIT PETITION, COMING ONFOR PRELIMINARYHEARING IN “B’ GROUP, THIS DAY, ORDER WAS MADE THEREIN AS|UNDER: CORAM:HON BLE MR. JUSTICE SURAJ GOVINDARAJ] ORAL ORDER (PER: HON'BLE MR. JUSTICE SURAJ GOVINDARAJ) 1.The petitioner is before this Court seeking for tne following reliefs: 7.Issue a writ of Certiorari or direction in the nature Of|a writ of Certiorari quasning the order passed U/S|143(3) r.w.s 144B dated 21.03.2024 bearing No.|ITBA/AST/S/143(3)/2023-24/10630/70238(1) Issuedby the Respondent No.2 for the assessment year|20225-2353 herein marked as Annexure-Aa writ of Certiorari quasning the order passed U/S|143(3) r.w.s 144B dated 21.03.2024 bearing No.|ITBA/AST/S/143(3)/2023-24/10630/70238(1) Issuedby the Respondent No.2 for the assessment year|20225-2353 herein marked as Annexure-A 2 Issue a Writ of Certiorari or direction in the neture|of writ of Certiorari quashing the penalty notice U/s2/4 R.W.S D/SJOA Of the Act dated 71.03.7074bearing|DINNo. ITBA/PNL/S/270A/202324/1063070596(1) by the Respondent No.2 for the|assessmen gYear2ODZ?D-7hereinmarkedaS|Annexure-A1;of writ of Certiorari quashing the penalty notice U/s2/4 R.W.S D/SJOA Of the Act dated 71.03.7074bearing|DINNo. ITBA/PNL/S/270A/202324/1063070596(1) by the Respondent No.2 for the|assessmen gYear2ODZ?D-7hereinmarkedaS|Annexure-A1; 3.And pass sucn other orders as this Hon’bie Court:deems fit and proper in the interest of Justice and|egulty.deems fit and proper in the interest of Justice and|egulty. - 3 - NC: 2024:KHC-K:746/WP No. 201053 of 2024 2.The contention of the petitioner is that the petitioner has_spent an amount of Rs.65,13,65,170/- towards the|purchase of raw cotton from the farmers as regards|which the said farmers have been paid by casn and they|have executed necessary receipts in respect thereof.spent an amount of Rs.65,13,65,170/- towards the|purchase of raw cotton from the farmers as regards|which the said farmers have been paid by casn and they|have executed necessary receipts in respect thereof. 3.And pass sucn other orders as this Hon’bie Court:deems fit and proper in the interest of Justice and|egulty.deems fit and proper in the interest of Justice and|egulty. - 3 - NC: 2024:KHC-K:746/WP No. 201053 of 2024 2.The contention of the petitioner is that the petitioner has_spent an amount of Rs.65,13,65,170/- towards the|purchase of raw cotton from the farmers as regards|which the said farmers have been paid by casn and they|have executed necessary receipts in respect thereof.spent an amount of Rs.65,13,65,170/- towards the|purchase of raw cotton from the farmers as regards|which the said farmers have been paid by casn and they|have executed necessary receipts in respect thereof. 3.The respondent No.2 nas disbelieved the purchase made.to an extent of Rs.65,13,65,1/70/- on the ground that thepayments towards purchase of cotton was made to non|GST entities and there are no records to indicate as to'what is the exact amount paid and on the further groundthat the onus lies on the assessee to prove thegenuineness of the transaction carried out during the|year by providing relevant supporting evidences.to an extent of Rs.65,13,65,1/70/- on the ground that thepayments towards purchase of cotton was made to non|GST entities and there are no records to indicate as to'what is the exact amount paid and on the further groundthat the onus lies on the assessee to prove thegenuineness of the transaction carried out during the|year by providing relevant supporting evidences. 4The submission of Sri Ravi Shankar S.V., learned counselfor the petitioner is that the petitioner had submitted|Sample bills along with the details of the persons to|whom the cash payment was made, which are also|enclosed with the record of tenancy and crops which|would correlate to growth of cotton by them and supply|thereof to the petitioner. These aspects not naving beentaken into consideration. If at all, the assessing officer|for the petitioner is that the petitioner had submitted|Sample bills along with the details of the persons to|whom the cash payment was made, which are also|enclosed with the record of tenancy and crops which|would correlate to growth of cotton by them and supply|thereof to the petitioner. These aspects not naving beentaken into consideration. If at all, the assessing officer| had any more queries, the assessing officer could have|called upon the petitioner to produce those documents.|No opportunity was given to the petitioner to produce tne|documents, despite the petitioner having offered to|produce all the documents, no demand having been|made, a presumption has been drawn that the payments|made towards the purcnase of cotton cannot be|considered in view of the sellers being non GST entities is only based on assumption and as such, he submits that|without rejecting the books of account, addition of the|amounts estimated by the assessing officer into the|income of the petitioner is unsustainable and in this|regard he relies upon the decision of this Court in the|case of Commissioner of Income-tax, Belgaum vs.Anil Kumar & Co.[r], more particularly para 11 thereof,which is reproduced hereunder easy reference. | 11. Insofar as tne estimation of gross profit madebytheAssessingOfficermodifiedby theCIT(Appeals), tribunal has rightly held that whenthe books of accounts of the assessee had not beenrejected and assessment having not been framedUndersection 144of the Income Tax Act the Said|authorities were in error in_ resorting to anestimation of [Income and such exercise undertakenby them was not sustainable.Section 145(3)of the| 11. Insofar as tne estimation of gross profit madebytheAssessingOfficermodifiedby theCIT(Appeals), tribunal has rightly held that whenthe books of accounts of the assessee had not beenrejected and assessment having not been framedUndersection 144of the Income Tax Act the Said|authorities were in error in_ resorting to anestimation of [Income and such exercise undertakenby them was not sustainable.Section 145(3)of the| Act lays down that the Assessing Officer canproceed to make assessment to the best of Nisjudgment undersection 144of tne Act only in tneevent of not being satisfieq with the correctness ofthe accounts produced by the assessee. In theinstant case tne Assessing Officer has not rejectedthe books of accounts of the assessee. To put itdifferently the Assessing Officer has not made out acase that conditions laid Gown In|Section 145(3)ofthe Act are satisfied for rejection of the books ofaccounts. Thus, when the books of accounts aremaintained by the assessee in accordance with tnesystem of accounting, in the regular course of hisDUSINESS,|Salewouldformthebasisforcomputation of income. In the instant case it isnoticed that neither the Assessing Officer norCIT(Appeals) have rejected the books of accountsmaintained by tne assessee in the course of thebusiness. As sucn tribunal has rightly rejected orset aside the partial aadition made by AssessingOfficer for arriving at gross profit and sustained bythe ClIT(Appeais) and rightly heid that entireaadition made by the Assessing Officer was liableto be deleted. The said finding is based on soundappreciation of facts and it does not give rise forframing substantial question of law. 5.His submission,|2/0609460, Is that the assessment is.required to be set aside by allowing the relief sougnt for. |required to be set aside by allowing the relief sougnt for. | 6.Sri.Thirumalesh, counsel for the revenue, would submit.that it was the duty of the assessee to Nave furnished allthe documents that the assessee relies upon, irrespectiveof whether the assessing officer had sought for or not,|more so since this is a faceless assessment. The assesseethat it was the duty of the assessee to Nave furnished allthe documents that the assessee relies upon, irrespectiveof whether the assessing officer had sought for or not,|more so since this is a faceless assessment. The assessee Knowing fully>0==that the assessment is being carried|out in a faceless format, there is no question of any|further demand being made. It was for the assessee to |have submitted all the documents which would have beenout in a faceless format, there is no question of any|further demand being made. It was for the assessee to |have submitted all the documents which would have been evaluated as per the faceless system. ] Heard Sri.Ravi Shankar S.V., learned counsel for the)petitioner and Sri.M.Tnirumalesn, learned counsel for the|respondent and perused papers. |petitioner and Sri.M.Tnirumalesn, learned counsel for the|respondent and perused papers. | Knowing fully>0==that the assessment is being carried|out in a faceless format, there is no question of any|further demand being made. It was for the assessee to |have submitted all the documents which would have beenout in a faceless format, there is no question of any|further demand being made. It was for the assessee to |have submitted all the documents which would have been evaluated as per the faceless system. ] Heard Sri.Ravi Shankar S.V., learned counsel for the)petitioner and Sri.M.Tnirumalesn, learned counsel for the|respondent and perused papers. |petitioner and Sri.M.Tnirumalesn, learned counsel for the|respondent and perused papers. | 8.The assessee admittedly has produced certain receipts bythe farmers for having received the amounts paid|thereunder by casn. Tne assessee ought to havefurnisned all the details relating to the aforesaid amount|which could have been considered by the assessing|authority in the faceless format. Not having done so has|resulted in assumption made by the assessing officer|which has resulted in the present situation. Hence, I am|of the considered opinion that an opportunity would be|required to be granted to the assessee to make available|all the documents in his possession to evidence the|the farmers for having received the amounts paid|thereunder by casn. Tne assessee ought to havefurnisned all the details relating to the aforesaid amount|which could have been considered by the assessing|authority in the faceless format. Not having done so has|resulted in assumption made by the assessing officer|which has resulted in the present situation. Hence, I am|of the considered opinion that an opportunity would be|required to be granted to the assessee to make available|all the documents in his possession to evidence the| NC: 2024:KHC-K:746/WP No. 201053 of 2024 payment of a sum of Rs.65,13,65,170/- to the farmers|for the purcnase of cotton. | QOThe assessing officer would also have to take into.consideration the quantity of cotton required for the|purposes of the trading activity resorted to by the|assessee by correlating the amount of raw _ cottorequired for baleing the said cotton and selling the same|consideration the quantity of cotton required for the|purposes of the trading activity resorted to by the|assessee by correlating the amount of raw _ cottorequired for baleing the said cotton and selling the same| as cotton bales wnicnh ts the business of the assessee and it is only thereafter that tne gross profit could be| assessed, and not on an assumption at the rate of| 12.5%. In that view of the matter, I pass the following: ORDER 3"The writ petition isallowed. 33"The order dated 21.03.2024 passed by respondentNo.2 for the assessment year 2022-23 videAnnexure-A is quashed.No.2 for the assessment year 2022-23 videAnnexure-A is quashed. 333"The penalty notice dated 21.03.2024 passed byrespondent No.2 for the assessment year 202-23vide Annexure-Al is quashed.respondent No.2 for the assessment year 202-23vide Annexure-Al is quashed. NC: 2024:KHC-K:746/WP No. 201053 of 2024 3C"The matter is remitted to the assessing officer forfresh consideration by permitting the petitioner tosubmit all the relevant documents and the workingof the assessee within a period of 30 days fromdate of receipt of a copy of this order.fresh consideration by permitting the petitioner tosubmit all the relevant documents and the workingof the assessee within a period of 30 days fromdate of receipt of a copy of this order. C"The assessee to furnisn all the receipts supporting documents, the working of.2/0industry of the|petitioner, including the gross profit estimate of theindustry. petitioner, including the gross profit estimate of theindustry. PRS| List No.: 2 S| No.: 24| Sd/-' (SURAJ GOVINDARAJ)JUDGE|